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(\L  LIBRARY  FACILII 

L 

UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LIBRARY 


WASHINGTON  COKPOEATIONS 


CONTAINING  THE 


STATUTES  OF  THE  STATE  OF 
d  WASHINGTON 

EELATING    TO    COEPOEATIONS    AS    AMEJNDED    TO    AND 
INCLUDING    THE    SESSION    OF    1913 


0 

TOGETHER    WITH   A 


SUMMAEY 


OF  THE  GENEEAL  COEPOEATION  LAW,  INCLUDING  EMINENT 

DOMAIN,  AN  OUTLINE  OF  COEPOEATE  PEOCEDUEE, 

ANNOTATIONS,  AND  FOEMS 


BT 

STEPHEN  A.  McINTIRE,  A.B.,  LL.B. 


POETLAND,  OEEGON 

GEO.  A.  BATESON  &  CO.,  Inc. 

Law  Book  PubHshers 
1913 


r     , 


Copyright,   1913 

BY 

STEPHEN  A.  McINTIRE,  A.B.,  LL.B. 


San  Francisco 

The  Filmer  Brothers  Electrotype  Company 

Typographers  and  Stereotypers 


As  A  Mark  of  Affectionate  Respect 
This  Book  is  Inscribed 

TO 

Joseph  H.  McIntirb. 


PREFACE. 


This  book  is  intended  to  bring  within  handy  reach  and 
ready  reference  by  the  practitioner  the  principal  rules  of 
Corporation  Law  in  the  State  of  Washington,  with  the  most 
weighty  authorities  therefor — in  the  Summary  making  acces- 
sible ruling  decisions  in  general,  scattered  in  digests  and 
commentaries;  in  the  Statutes  (i.  e.,  of  Washington  affecting 
corporations,  as  compiled  by  the  Secretary  of  State  and  re- 
verified  from  the  Session  Laws),  collecting  and  arranging, 
in  notes  and  annotations  to  the  various  sections,  the  Wash- 
ington decisions  construing  and  bearing  upon  the  statutory 
provisions;  and  in  the  Outline  of  Procedure  pointing  out  the 
sections  of  the  statutes  regulating  particular  matters,  and 
requisites  for  compliance  with  them,  together  with  numerous 

forms  most  frequently  required  for  use. 

S.  A.  ]\L 

(V) 


CONTENTS. 


Pages. 
Introduction    1-  19 

SUMMAEY. 

CHAPTER  I. 

Sections. 

Corporate   Existence 1-     3 

Organization  of  a  Corporation 4-     7 

CHAPTER  II. 

Corporations  De  Jure  and  De  Facto 18-  20 

Liability  of  Stockholders  of  De  Facto  Corporation 21 

CHAPTER  III. 

Corporate  Powers  32-  46 

Acquiring  and  Holding  of  Real  Property  by  Corporations 47-  56 

CHAPTER  IV. 

Ultra  Vires  Transactions 60-  71 

Estoppel  to  Set  Up  Ultra  Vires  as  a  Defense 75-  86 

CHAPTER  V. 

Corporate  Crimes  and   Torts 90 

Monopolies,  Trusts  and  Restraints  of  Trade &1-106 

CHAPTER  VI. 

Stockholders    110-134 

Voting  by  Proxy  and  Voting  Trusts 135-150 

CHAPTER  VII. 

Directors  and  Officers 155-164 

Liability  as  Individuals  of  Directors  and  Officers  of  Corporations 

for  Acts  or  Failure  to  Act  while  Engaged  in  Such  Capacity.  .165-169 

(vii) 


VIU  CONTENTS. 

CHAPTER  VIII. 

Sections. 

Consolidation  and  Merger 175-179 

Holding  Stock  of  Itself  or  Other  Companies  by  Corporation 180 

CHAPTER  IX. 
Eeceivers    185-192 

CHAPTER  X. 

Termination  of  Corporate  Existence 195-203 

Period  of  Corporate  Existence 204-205 

CHAPTER  XI. 

Foreign  Corporations 210-221 

Actions  and  Suits  by  and  Against  Foreign  Corporations 222-237 


EMINENT  DOMAIN. 

CHAPTER  XII. 
PubUc  Use    250-266 

CHAPTER  XIII. 

Taking  of  Private  Property 270-288 

CHAPTER  XIV. 
Compensation    290-295 

CHAPTER  XV. 

Procedure    300-311 


WASHINGTON  STATUTES. 

(Annotated) 

General  Provisions 401-451 

Foreign  Corporations 452-461 

Eminent  Domain    462-497 


CONTENTS.  IX 

Sections. 

Railroad  Corporations  498-508 

Electric  Railway  Companies 511-513 

Telegraph  and  Telephone  Companies 514-524 

Boom  Companies   525-541 

Toll  Logging  Roads  and  Ways 542-545 

Patrons  of  Husbandry 547-549 

Building  Loan  and  Savings  Associations 550-587 

Trust  Companies    588-604 

Banks — Formation  and  Regulation 605-662 

Corporations  Other  than  Those  Formed  for  Profit 663-675 

Religious,  Educational,  Social  and  Charitable  Corporations 677-685 

Social  and  Charitable  Organizations •  •  ■  •  686-697 

Benevolent    Societies    for    Protection    of    Homeless    or    Abused 

Children    698-705 

Cemetery  Associations  706-713 

Fees  and  License  Tax 714-727 

Reinstatement  Provisions   728-73 1 

Constitutional  Provisions  732-751 


OUTLINE 

OP 

CORPORATE  PROCEDURE. 

Character  of  Corporate  Existence 760 

The  Several  Kinds  of  Corporations 761 

Preliminary  Considerations   762 

Articles  of   Incorporation 763 

First  Meeting  of  Trustees 764 

Subscriptions    765 

Preferred    Stock    766 

By-laws    767 

Issue  of  Stock  for  Property 768 

"Various  Proceedings 769-776 

Dissolution    777 

Foreign  Corporations   778 

Various  Purpose  Clauses  for  Corporations 779-796 

Forms    797-823 


INTEOBUCTION. 


As  is  the  case  with  much  of  our  common  law  other  than 
land  tenures  founded  on  the  rules  of  mediaeval  feudalism,  we 
are  largely  indebted  to  the  civil  law,  the  jus  civile  of  the 
ancient  Romans,  for  our  conception  of  a  corporation  and  the 
basic  foundation  of  the  rules  of  law,  that  have  become  estab- 
lished, governing  corporate  relations. 

The  term  "corporation"  is  derived  from  the  Latin  verb 
"Corporare, "  to  form  into  a  corpus  or  body,  and  is  used  to 
describe  the  result  of  associating  individuals  into  one  body, 
entity  or  unit,  recognized  as  such  by  the  law,  as  distinguished 
from  merely  associated  individuals  acting  together.  To  illus- 
trate :  Title  to  land  owned  by  a  corporation  is  in  the  corpora- 
tion as  such,  and  the  members  of  the  corporation  have  no 
title  to  the  land,  and  accordingly  dealing  with  such  property 
is  simplified,  since  the  title  is  not  affected  by  the  life  or  death 
or  other  vicissitude  of  the  individual  members  of  the  corpo- 
ration. 

So  the  corporate  rights  and  liabilities  in  general  are  quite 
distinct  from  those  of  the  individual  members  who  become 
such  and  cease  to  be  such  in  perpetual  succession  during  the 
corporate  existence  without  in  that  respect  affecting  the  cor- 
porate status  in  the  least  degree. 

These  peculiar  characteristics  of  corporations  have  been  de- 
veloped in  much  detail  in  the  American  and  English  statutes 
and  decisions,  but  the  conception  of  the  corporation  was  orig- 
inated by  the  Romans,  as  appears  from  the  readings  in  the 
Institutes  of  Justinian  and  the  Digest,  nomine  "Collegia," 
the  term  which  was  applied  by  the  Romans  themselves  to  what 
we  term  by  the  Latin  derivative  "Corporations."  The  Col- 
legia of  the  Romans  or  Universitates  were  formed  for  various 
public  and  private  purposes,  and  distinguished  by  names  de- 
scriptive of  such  different  objects,  as,  e.  g.,  Civitates,  for  pub- 
1  (1) 


INTRODUCTION.  U 

lie  governing  bodies  similar  to  our  municipalities,  and  Fabri, 
Pictores,  Navicularii,  for  business,  trade,  and  other  purposes. 

In  all  these  societies  the  unity  of  the  juristic  person  as  dis- 
tinguished from  the  individual  members  in  the  matter  of  suc- 
cession, the  right  to  sue  and  be  sued,  and  the  ownership  of 
property  wholly  independent  of  the  individual  members,  was 
fully  reco^ized  and  applied. 

This  conception  of  a  corporation  was  all  along  more  or  less 
familiar  to  the  scholastic  clerics  versed  in  Latin  and  Roman 
institutions,  and  the  ecclesiastics  of  England  early  adopted  it 
as  a  device  to  perpetuate  their  ownership,  in  clerical  succes- 
sion, as  distinguished  from  individual  inheritance  or  devolu- 
tion, of  the  property,  mostly  real,  that  from  religious  or  other 
motives  was  donated  to  them  from  time  to  time  for  charitable 
and  church  purposes.  They  applied  and  utilized  the  corpo- 
ration, therefore,  in  all  instances  to  accomplish  succession  of 
property  in  the  members  of  societies,  educational-,  religious 
and  charitable,  and  as  well  in  the  successive  individual  in- 
cumbents of  offices,  in  time  classifying  their  corporations  into 
aggregate  and  sole,  according  as  they  were  societies  or  a  suc- 
cession of  individual  incumbents  of  an  office. 

It  was  but  natural  that  the  corporation  previously  utilized 
for  governmental  and  charitable  purposes  should  be  adopted 
for  business  purposes  as  soon  as  manufactures,  trade  and 
commerce  began  to  take  the  place  of  the  more  primitive  pur- 
suits, and  co-operation  in  associations  of  individuals  and 
property  was  found  necessary  for  the  more  efficient  and  suc- 
cessful accomplishment  of  business  objects  than  could  be  at- 
tained by  the  individuals  acting  separately  or  in  cumbersome 
partnerships.  Once  adopted  for  business  purposes  the  use  of 
corporations  for  joint  stock  business  objects  rapidly  extended 
and  led  to  the  further  classification  of  corporations  into  eccle- 
siastical and  lay,  civil  and  eleemosynary,  public  and  private. 

The  public  corporations,  cities,  merchant  fraternities,  and 
the  like  were  undoubtedly  antecedent  to  private  corporations 
and  furnished  the  conception  for  the  latter.  The  res  pub- 
lica,  public  thing,  or  community  of  interest,  recognized  as  the 
common  important  concern  of  that  sturdy  band  of  robbers 
who  fortified  themselves  on  the  seven  hills  by  the  Tiber  about 


3  INTRODUCTION. 

eight  hundred  years  before  the  Christian  era,  became  the 
Respubliea,  dominant  mistress  of  all  the  known  world  in  the 
centuries  prior  to  and  succeeding  the  appearance  of  Jesus 
Christ.  Similarly  during  the  Roman  supremacy,  and  after- 
ward, municipal  or  town  communities  and  cities  became  estab- 
lished in  all  the  countries  now  comprising  Europe,  and  these 
cities  and  towns,  with  their  merchant  orders  and  fraternities, 
all  during  the  period  of  the  decline  of  Rome  and  the  Middle 
Ages,  and  so  on  down  after  the  revival  of  learning,  kept  alive 
the  spirit  of  freedom  and  liberty  once  characteristic  of  the 
Romans,  and  against  eccleciastics,  kings  and  feudal  barons 
fought  the  fight,  ultimately  victorious,  for  political  freedom. 

While,  however,  the  public  corporation  was  being  largely 
instrumental  in  the  fight  for  political  freedom,  the  private 
corporation  from  the  earliest  was  subject  to  various  abuses 
which  attempts  were  made  to  correct  by  the  Romans  and  later 
by  their  successors  in  government. 

In  England,  as  before  said,  the  ecclesiastics  adopted  the  cor- 
poration for  the  purpose  of  succession  in  their  ownership  of 
property,  with  the  result  that  the  eccleciastical  corporations, 
aggregate  and  sole,  including  monasteries,  churches,  bishops, 
vicars,  et  al.,  soon  bade  fair  in  a  comparatively  brief  period 
to  acquire  into  their  spiritual  hands  most,  if  not  all,  the  lands 
of  England. 

This  was  regarded  as  an  abuse  by  some,  particularly  the 
king  and  the  feudal  barons,  whose  incidents  of  tenure  were 
thus  cut  off  by  what  they  termed  the  dead  hand  of  the  church 
and  its  members  thus  incorporated.  They  therefore  pro- 
ceeded to  correct  the  evil  by  acts  of  Parliament,  in  the  various 
Statutes  of  Mortmain  so  called,  providing  for  the  forfeiture 
of  lands  donated  or  conveyed  to  corporations. 

That  the  abuse  was  dangerous  and  one  with  which  it  ap- 
peared difficult  to  deal  effectively,  as  well  as  the  mischief 
aimed  at,  is  apparent  in  the  preamble  of  the  Statute  De  Re- 
ligiosis,  A.  D.  1279,  commonly  called  the  Statute  of  Mortmain, 
"Where  of  late  it  was  provided  that  religious  men  should  not 
enter  into  the  fees  of  any  without  license  and  will  of  the 
chief  lords  of  whom  such  fees  be  holden  immediately;  and 
notwithstanding  such  religious  men  have  since  entered  as  well 


INTRODUCTION.  4 

into  their  own  fees  as  into  the  fees  of  other  men  appropriat- 
ing and  buying  them,  and  sometimes  receiving  them  of  the 
gift  of  others,  whereby  the  services  that  are  due  of  such  fees, 
and  which  at  the  beginning  were  provided  for  the  defence 
of  the  Realm,  are  wrongfully  withdrawn  and  the  chief  lords 
do  lose  their  escheats  of  the  same;  we  therefore,  to  the  profit 
of  our  Realm,  intending  to  provide  convenient  remedy  by 
the  advice  of  our  prelates  earls  barons  and  other  our  sub- 
jects being  of  our  council  have  provided  established  and  or- 
dained, that  no  person  religious  or  other  whatsoever  he  be 
presume  to  buy  or  sell  or  under  color  of  gift  or  lease  or  by 
reason  of  any  other  title  whatsoever  it  be,  to  receive  of  any 
man,  or  by  any  other  craft  or  device  to  appropriate  to  him- 
self any  lands  or  tenements,  under  pain  of  forfeiture  of  the 
same  whereby  such  lands  or  tenements  may  anywise  come  into 
Mortmain." 

By  Statute  of  Richard  II  this  prohibition  was  extended  to 
include  all  corporations,  business  as  well  as  religious,  and 
from  the  Statute  of  Wills  of  Henry  VIII,  enabling  devises  of 
land,  corporations  were  excepted  as  devisees.  By  the  Act  of 
George  II,  commonly  called  the  Mortmain  Act,  all  devises  to 
charitable  uses,  whether  to  corporations  or  individuals,  were 
prohibited,  while  by  the  Wills  Act  of  1837  the  old  provision 
against  devises  to  corporations  was  omitted,  such  devises  fall- 
ing under  the  old  Statutes  of  Mortmain.  Finally,  by  the 
Mortmain  and  Charitable  Uses  Act  of  1888  corporations  are 
prohibited  from  taking  land  for  any  purpose  without  license 
from  the  crown.  It  will  thus  be  seen  that  from  the  earliest 
days  it  has  been  the  policy  of  England,  rigidly  adhered  to 
and  enforced,  to  prevent  land  from  being  held  by  corporations 
and  thus  sequestered  from  individual  ownership. 

In  America  the  adaptable  spirit  of  enterprise  characteristic 
of  Americans  seized  upon  the  corporation  from  the  outset,  as 
the  instrumental  means  affording  the  co-operation  necessary 
to  the  successful  attainment  of  desired  ends,  in  the  struggle 
with  natural  forces  and  conditions  hitherto  unsubdued. 

With  ever-increasing  frequency  the  corporation  has  been 
utilized  for  such  co-operation  in  the  attainment  of  purposes, 
great  and  small,  until  at  present  the  corporation  is  formed 


5  INTRODUCTION. 

almost  universally  for  the  accomplishment  of  public  and  pri- 
vate objects,  whether  religious,  educational,  charitable,  or  for 
business  and  pecuniary  profit. 

Common  as  they  have  become,  however,  corporations  have 
always  been  looked  upon,  by  those  not  immediately  benefited, 
with  more  or  less  jealousy,  fear  and  hatred,  and  as  an  insti 
tution  to  be  blamed  for  any  existing  ills  not  otherwise  ac- 
counted for  in  a  manner  satisfactory  to  the  less  successful 
and  fortunate  members  of  the  community.  Indeed,  attempts 
have  been  made  by  the  states  to  stay  the  tide  of  corporate 
influx,  but  with  a  degree  of  success  very  like  to  that  of  Canute 
in  stemming  the  waves  of  the  sea  by  royal  mandate. 

Chancellor  Kent,  in  his  Commentaries  written  about  1825, 
says: 

"The  propensity,  in  modern  times,  has,  however,  been  to 
multiply  civil  corporations,  especially  in  the  United  States, 
where  they  have  increased  in  a  rapid  manner  and  to  a  most 
astonishing  extent.  The  demand  for  charters  of  incorpora- 
tion is  not  merely  for  municipal  purposes,  but  usually  for  the 
more  private  and  special  objects  of  assisting  individuals  in 
their  joint  stock  operations  and  enterprising  efforts,  directed 
to  the  business  of  commerce,  manufactures  and  the  various  de- 
tails of  internal  improvement.  This  branch  of  jurisprudence 
becomes,  therefore,  an  object  of  curious  as  well  as  deeply  in- 
teresting research.  The  multiplication  of  corporations,  and 
the  avidity  with  which  they  are  sought,  have  arisen  in  conse- 
quence of  the  power  which  a  large  and  consolidated  capital 
gives  them  over  business  of  every  kind,  and  the  facility  which 
the  incorporation  gives  to  the  management  of  that  capital, 
and  the  security  which  it  affords  to  the  persons  of  the  mem- 
bers, and  to  their  property  not  vested  in  the  corporate  stock. 
The  convention  of  the  people  of  New  York,  when  they 
amended  their  constitution  in  1821,  endeavored  to  check  the 
improvident  increase  of  corporations  by  requiring  the  assent 
of  two-thirds  of  the  members  elected  to  each  branch  of  the 
legislature  to  every  bill  for  creating,  continuing,  altering  or 
renewing  any  body  politic  or  corporate.  Even  this  provision 
seems  to  have  failed  in  its  purpose;  for  in  the  session  of  1823, 
being  the  first  session  of  the  legislature  under  operation  of 


INTRODUCTION.  O 

this  check,  there  were  thirty-nine  new  private  companies  in- 
corporated, besides  numerous  other  acts  amending  or  altering 
charters.  The  various  acts  of  incorporation  of  private  com- 
panies for  banking,  manufacturing,  literary,  charitable  and 
insurance  purposes,  for  turnpike  and  railroads,  and  toll 
bridges,  and  for  many  other  objects  upon  which  private  in- 
dustry, skill  and  speculation  can  be  freely  and  advantageously 
employed,  constitute  a  mighty  mass  of  charters,  which  occupy 
a  large  part  of  the  volumes  of  the  statute  law  in  almost  every 
state." 

In  noteworthy  contrast  is  the  statement,  for  example,  of 
Mr.  Frank  White  in  the  Introductory  to  his  work  on  New 
York  Corporations  of  the  year  1905,  as  follows :  ' '  The  number 
of  corporations  formed  under  the  laws  of  this  state  during  the 
calendar  year  1904  reached  the  record  figures  of  4,420,  and 
in  view  of  the  fact  that  505  new  corporations  came  into  exist- 
ence here  in  the  month  of  January,  1905,  it  is  fair  to  predict 
that  the  current  year  will  show  an  aggregate  in  excess  of  the 
high  record  of  the  preceding  year." 

In  other  words,  thousands  of  corporations  are  now  formed 
yearly  in  every  state,  though  the  jealousy  and  fear  of  corpo- 
rations has  increased  rather  than  diminished  since  the  time 
of  the  foregoing  statement  by  Chancellor  Kent,  and  in  fact 
was  probably  never  greater  than  at  the  present  day. 

The  reason  is  not  far.  The  corporation,  like  all  things 
human,  institutions  included,  has  its  good  uses  and  its  abuses, 
and  as  yet,  in  the  minds  of  the  majority  of  the  people  con- 
cerned, the  good  prevails  over  the  bad.  The  problem  as  to 
how  the  abuses  may  be  eliminated  without  destroying  the  root 
and  the  sap,  and  so  the  good  tree  itself,  remains  to  be  worked 
out.  And  indeed  it  must  be  worked  out  and  cannot  be  solved 
by  good  or  evil  catastrophe.  The  pruning-iron  must  be  ap- 
plied as  wisely  as  possible  to  cut  away  the  already  advanced 
growth  of  abuse,  but  the  tree  fruitful  of  general  good  can  only 
rise  by  the  slow  steps  of  growth  and  evolution.  Natura  nou 
facit  saltum.  Growth  is  gradual  in  all  natural  development, 
and  neither  political  nor  economic  progress  constitutes  an  ex- 
ception to  the  general  rule.  If  this  simple  truth,  generally 
enough  understood,  could  by  some  forceful  accentuation  be 


7  INTRODUCTION. 

brought  home  to  the  consciousness  of  the  public  so  as  to  be 
really  felt  and  actually  sensed,  sufficiently  to  be  kept  in  mind, 
the  way  would  be  cleared  for  real  progress  in  the  correction 
of  abuses  that  undoubtedly  exist,  and  much  bellowing  flabber- 
gast would  be  eliminated  for  want  of  audience. 

It  is  to  be  noted  that  the  corporation  in  America,  both  in 
its  legal  status  and  its  extensive  use,  is  different  in  several 
particular  respects  from  its  prototype  in  England.  There 
corporations,  time  out  of  mind,  have  come  into  existence  in 
several  ways — by  royal  grant,  by  prescription  and  by  act  of 
Parliament — while  with  us  the  corporation  exists  only  by 
virtue  of,  and  to  the  extent  of,  the  authority  conferred  by 
the  statute  governing  the  case.  This  involves  a  diametrically 
opposite  approach  to  certain  questions — e.  g.,  as  to  the  extent 
of  corporate  powers — for  in  England  the  question  is  one  of 
statutory  limitation  of  powers  otherwise  potentially  existing, 
and  the  validity  of  corporate  acts,  ultra  vires,  or  beyond  the 
express  powers  conferred  by  the  corporate  charter,  being  not 
necessarily  for  that  reason  null  and  void,  is  left  still  to  be 
determined.  But  with  us  the  charter  contains  the  limit  or 
boundary  set  by  the  creating  statute  to  the  corporate  power 
and  existence,  and  any  corporate  act  attempted  beyond  that 
limit  has  no  greater  legal  validity  as  a  corporate  act  than  if 
the  charter  had  not  been  granted  and  the  corporation  not 
created. 

Another  important  respect  in  which  American  corpora- 
tions are  different  from  English  is  that  the  Mortmain  Acts 
have  never  been  enacted  in  America  except  in  Pennsylvania, 
and  have  been  repealed  in  that  state,  so  that  while  we  hear 
continually  the  cry  of  the  single-taxers  and  others,  attribut- 
ing inequality  in  wealth  to  the  unearned  increment  of  value 
in  land  owned  by  individuals,  which,  whatever  maj^  be 
thought,  cannot  be  remedied  without  a  violation  of  the  fun- 
damental principle  of  private  property,  the  corporation  which 
is  the  mere  creature  of  statute,  with  no  rights  as  an  indi- 
vidual and  no  rights  of  any  sort  except  what  are  expressly 
given  by  the  creating  statute,  is  everywhere  allowed,  with 
little  remonstrance,  to  acquire  and  hold  land  ad  libitum,  and 
oftentimes  in  large  tracts,  for  the  express  purpose  purely  of 


INTRODUCTION.  8 

realizing  the  aforementioned  unearned  increment  or  increase 
in  value.  A  compulsory  disposition  at  the  market  within  a 
limited  period  of  their  lands,  not  directly  needed  by  corpora- 
tions for  their  corporate  purposes,  Avould  be  in  most  cases 
constitutional  as  well  as  consonant  with  the  best  spirit  of 
our  Anglo-Saxon  institutions,  and  would  reopen  a  wide  door 
of  opportunity  to  the  individual.  Some  well-considered  ap- 
plication of  the  principle  embodied  in  the  time-honored  Stat- 
utes of  Mortmain  is  worthy  of  consideration. 

Another  peculiarity  of  our  corporation  laws  is  their  diver- 
sity. Our  corporations  are  formed  for  the  most  part  under 
state  laws,  and  these,  while  similar  in  many  respects,  are 
divergent  in  others,  so  that  business  men  about  to  incorpo- 
rate have  a  line  of  forty-five  and  more  varieties  of  corporate 
vestments  from  which  to  choose  that  best  adapted  to  their 
needs;  and  it  is  not  uncommon  for  men  doing  business  in 
New  York  City,  with  no  idea  of  going  elsewhere,  to  incorpo- 
rate, for  example,  in  Arizona.  This  condition  of  things  soon 
brought  about  a  competition  among  the  various  states  and 
territories  in  offering  inducements  to  influence  the  choice  of 
the  state  in  which  to  incorporate  as  the  legal  domicile  of  the 
corporation,  the  recognized  object  being  to  attract  capital 
to  the  state  and  incidentally  to  swell  the  state  funds  in  the 
treasury  with  incorporation  taxes  and  franchise  license  fees. 
This,  oddly  enough,  is  without  much  doubt,  to  a  large  degree, 
responsible  for  the  liberalization  of  the  corporation  laws  of 
the  various  states  to  a  point  of  laxity  otherwise  not  likely  to 
have  been  reached.  To  be  sure,  a  general  sweeping  provision 
against  monopoly  is  contained  in  most  of  the  statutory  corpo- 
ration laws  of  the  various  states,  but  in  the  prevailing  status 
of  corporation  laws  as  at  present  existing  such  a  provision  is 
not  dissimilar  in  its  effectiveness  to  a  legislative  enactment 
authorizing  debauchery  but  prohibiting  crime. 

Congress  has  also  fulminated  against  supposed  evils  in  the 
Sherman  Anti-Trust  Act  of  1890  with  an  effectiveness  not 
unlike  that  of  a  stuffed  cat  upon  pilfering  rodents  and  with 
little  other  result  than  of  late  a  noisy  cracking  of  shells  for 
the  squirrels  to  eat  the  meats  of  nuts  collected. 


9  INTRODUCTION. 

The  uses  of  corporations  are  great,  and,  left  uncurbed,  per- 
haps encouraged,  whether  consciously  or  not,  grow  into  abuses 
that  cannot  in  the  nature  of  things  be  effectively  corrected  by 
ex  post  facto  legislation. 

The  fundamental  use  of  the  corporation  is  the  facility  it 
affords  for  continued  effective  co-operation  of  numbers  of  in- 
dividuals, their  labors  and  capitals.  The  combined  effort  of 
such  union,  not  occasionally  but  usually,  produces  a  multiple 
of  the  result  that  would  be  obtained  by  the  aggregate  of  the 
same  individuals,  their  labors,  and  capitals,  in  independent 
undertakings.  The  decreased  cost  of  production  and  the  in- 
creased returns  in  the  larger  establishment,  due  to  lesser 
duplication  and  more  economic  utilization  of  fixed  capital, 
the  greater  skill  of  the  superintendence,  and  the  more  perfect 
division  of  labor,  are  generally  recognized.  The  possible  ex- 
tension of  this  principle  to  greater  and  still  greater  establish- 
ments is  without  definite  limit.  Limits  have  been  set  in. 
theory,  only  to  be  exceeded  in  practice,  and  while  instances 
may  be  cited  of  establishments  so  great  as  to  be  unwieldy,  in 
which  the  scale  is  turned  and  the  economic  losses  more  than 
counterbalance  further  economic  gains,  proof  thereby  is  made 
only  of  the  need  of  greater  skill  of  superintendence,  and  the 
principle  of  increased  returns  still  remains.  In  a  general 
way,  and  allowing  exceptions,  economic  experience  proves 
that  the  gross  returns  to  total  labor  and  capital  expended  in- 
crease in  more  than  proportionate  ratio  to  the  enlargement 
of  the  establishment,  and  of  the  practical  truth  of  this  our 
so-called  trusts  are  concrete  examples.  The  corporation 
makes  not  only  possible,  but  feasible,  combination  and  co-op- 
eration that  could  not  otherwise  be  approached,  and  thus 
makes  practicable  the  indefinite  enlargement  by  growth  and 
consolidation  of  great  establishments,  with  the  incident  eco- 
nomic increase  of  total  product.  This  can  have  but  one  re- 
sult upon  the  small  establishment;  it  goes  down  in  the 
struggle,  and  is  absorbed  into  the  greater  or  forced  out  of 
business.  The  wail  of  defeat  is  heard  through  the  land  that 
competition  is  destroyed  and  monopoly  is  rampant.  This  is 
supposed  to  be  a  sufficient  condemnation,  but  this  is  not  true 
unless  competition  be  an  end  m  itself  and  monopoly  neces- 


INTRODUCTION.  10 

sarily  bad.  If  competition  were  an  end  good  in  itself,  and 
to  be  sought  for  its  own  sake,  then  all  co-operation  would 
best  be  eliminated.  Competition  is  desirable  in  so  far  as  it 
is  conducive  to  individual  effort  and  affords  incentive  to  in- 
dividual enterprise,  keeping  open  the  door  of  opportunity 
and  forcing  the  best  product  at  the  lowest  cost,  thus  tending 
at  the  same  time  to  reward  effort  and  benefit  the  public.  But 
often  competition  is  not  conducive  to  these  ends,  but  opposite 
in  its  tendency,  and  such  competition  may  well  be  eliminated 
by  co-operation. 

Monopoly,  too,  is  an  ill-sounding  w^ord,  the  application  of 
which  merely  in  a  particular  instance  proves  nothing  with- 
out such  further  explanation  as  to  show  the  existence  of  some 
real  evil  or  abuse.  If  monopoly  be  used  to  describe  the  elimi- 
nation of  competition  to  a  certain  degree,  it  is  often  merely 
the  application  of  an  abusive  epithet  to  what,  in  the  interest 
of  the  community  at  large,  is  a  beneficent  condition. 

Suppose,  for  illustration,  that  in  a  sudden  cataclysm  of 
frenzied  philanthropy  the  owners  of  the  Standard  Oil  Com- 
pany, to  avoid  the  proceedings  that  culminated  in  the  decision 
for  the  dissolution  of  the  company  in  221  U.  S.,  had  decided 
to  divide  the  stock  of  the  company  among  the  consumers  of 
oil  and  the  other  products  of  the  company  in  the  United 
States,  and  the  stock  of  the  company  had  beer  distributed 
among  the  consumers  in  the  ratio  of  consumption  and  the 
company  then  had  continued  with  the  stock  so  distributed; 
the  net  result  would  be  that  the  consumers  of  oil  in  the 
United  States  would,  through  the  instrumentality  of  what  is 
now  regarded  as  a  wicked  monopoly,  be  producing  their  own 
oil  at  the  lowest  possible  cost  and  sharing  in  the  profits  from 
the  sale  of  the  company's  products  abroad.  Asswming,  for 
argument's  sake,  such  a  state  of  things  possible,  would  any- 
one gainsay  its  beneficence?  Still  the  elimination  of  compe- 
tition and  the  control  of  production  and  of  prices  would  exist 
to  the  same  degree.  Monopoly,  in  a  different  sense,  in  the 
sense  of  concentration  of  property  in  the  hands  of  a  few  in- 
dividuals by  the  concentration  of  stock  ownership,  would  be 
eliminated.  Is  it  not  true,  then,  that  the  great  corporate 
establishment  itself,  demonstrably  more  economic  as  a  pro- 


11  INTRODUCTION. 

ductive  a<?ent,  is  not  in  itself  an  evil,  call  it  monopoly  or  what 
you  will,  but,  under  existing  conditions  and  rules,  regulating 
the  control  and  management  of  corporations,  there  has  come 
about  a  concentraticn  of  stock  ownership  that  is  the  real  evil, 
and  a  resulting  concentration  or  monopol.y  of  v/ealth  and 
dominance  of  production  and  distribution  by  a  few  that  is 
indeed  no  less  intolerable  than  was  the  political  dominance 
by  the  feudal  barons  of  the  Middle  Ages? 

Concentration  of  stock  ownership  is  the  real  monopoly,  the 
real  specific  abuse,  to  be  prevented  and  cured,  and  not  merely 
fulminated  against  after  the  fact  exists. 

The  problem  is  not  one  of  the  production,  but  of  the  dis- 
tribution, of  wealth.  Admitting  this,  many  will  say  at  once 
that  the  true  remedy  for  this  and  for  all  problems  of  dis- 
tribution is  socialism,  i.  e.,  some  form  of  common  ownership 
of  property  and  administration  of  business — say,  government 
ownership  of  property  and  conduct  of  business,  as  distin- 
guished from  the  present  individual  ownership. 

Socialism  appeals  to  two  classes:  1.  Idealists,  who  dream  of 
an  impossible  equality  of  wealth;  2.  Those  certain  shiftless, 
incapable,  improvident  individuals  who  have  little  or  nothing, 
and  are  not  above  the  desire  to  share  in  a  division  of  other 
people's  property. 

To  the  real  American,  intelligent,  self-respecting  and  of 
that  pride  of  manhood  that  is  the  admitted  heritage  of  Anglo- 
Saxon  people,  it  is  abhorrent,  as  being  fundamentally  incon- 
sistent with  that  freedom  of  action  in  the  conduct  of  life 
and  pursuit  of  happiness  that  is  prized  above  every  vicissi- 
tude of  fortune  or  misfortune,  wealth  or  poverty.  Socialism, 
of  ver.y  necesssity,  imports  some  constituted  authority,  gov- 
ernmental or  other,  somewhere  in  the  community  that  shall, 
irrespective  of  the  individual  will,  (determine  the  fitness  and 
capacity  of  the  individual,  his  place  in  the  community,  the 
value  of  his  service,  the  amount  of  his  compensation,  the 
limitations  of  his  life,  the  measure  of  his  pursuit  of  happiness. 
No  material  wealth  would  make  such  conditions  tolerable  to 
free  men.  Furthermore,  if  it  were  tolerable,  no  human 
agency,  however  selected,  could  determine  the  relative  capa- 
city, physical,  mental  and  moral,  the  character  of  work  or 


INTRODUCTION.  12 

service  to  "be  rendered  by  each  to  the  community,  and  espe- 
cially the  relative  value  of  services  performed  by  the  indi- 
vidual members  of  the  community.  Such  a  function  would 
require  little  short  of  infinite  intellifrence,  knowledge  and 
goodness.  Still  further,  if  socialism  were  either  tolerable  or 
possible,  it  would  not  be  feasible  for  more  than  a  short-lived 
experiment,  for  it  is  not  in  accord  with  the  nature  of  human 
life,  and  would  remove  all  incentive  to  human  progress.  The 
history  of  man,  like  that  of  all  life,  is  the  story  of  struggle 
for  existence  and  survival.  It  is  man's  nature  to  struggle 
first  for  the  means  of  subsistence,  and  that  once  gained,  to 
continue  to  struggle  to  gain  distinction  of  one  sort  or  another, 
or  at  least  to  better  his  condition  as  compared  to  that  of  his 
fellows. 

Equality  of  wealth  or  well-being  in  men  is  therefore  neither 
possible  nor  desirable.  It  would  be  like  requiring  in  a  foot- 
race that  all  the  runners  should  keep  abreast  and  at  the  end 
all  touch  the  tape  at  once.  Just  as  such  a  rule  would  destroy 
all  zest  in  the  footrace,  so  would  equality  of  wealth  and  well- 
being  in  men  destroy  the  incentive  that  must  subsist  in  the 
individual  to  better  his  own  relative  condition. 

Acquisition  and  individual  betterment,  not  possession,  be 
it  great  or  small,  are  the  incentives  to  progress. 

But  there  are  many  who  would  readily  assent  to  the  posi- 
tion that  socialism  would  be  for  the  various  reasons  intoler- 
able and  impossible,  yet  believe  that  some  sort  of  government 
ownership  and  control  of  property  and  business  is  necessary 
in  order  to  correct  the  growing  inequality  of  wealth,  errone- 
ously attributed,  as  before  stated,  to  the  so-called  trusts  as 
instruments  of  production,  rather  than  to  the  concentration 
of  their  stock  ownership,  which  is  the  real  abuse. 

Mr.  Cook,  for  example,  the  well-recognized  authority  on 
corporation  law,  in  the  preface  to  the  last  edition  of  his  work 
on  Corporations,  while  recognizing  the  impracticability  of 
socialism,  proposes  as  a  remedy  for  our  railroad  problem  a 
gigantic  holding  company  to  purchase  the  railroads  of  the 
countrj%  under  the  supervision,  guaranty  and  partial  con- 
trol by  the  government.  Assuming  that  it  would  be  practical 
to  dispose  of  such  a  tremendous  stock  at  one  time  to  the  public 


13  INTRODUCTION. 

sufficient  to  enable  the  acquisition  of  the  roads,  who  would  be 
likely  to  buy  the  stock  in  such  tremendous  amounts  under 
the  plan  but  the  great  interests  to-day  owning  the  roads,  thus 
virtually  selling  their  own  property  to  themselves  at  a  large 
profit  to  themselves? — their  profits  being  measured  in  a  not 
widely  different  way  from  what  they  have  been  in  other  simi- 
lar cases,  namely,  by  the  extent  to  which  the  outside  public 
should  come  in  and  buy  stock  with  real  cash  out  of  pocket, 
the  government,  by  being  a  party  to  the  transaction,  having 
little  other  effect  than  to  cause  the  machinery  of  manipula- 
tion to  revolve  more  smoothly. 

An  experiment  in  straight-out  government  ownership  and 
operation  would  be  preferable  to  that,  and  much  could  be 
said  for  public  ownership  of  the  railways,  telephones,  tele- 
graphs and  other  public  utilities  to  prevent  unneeded  dupli- 
cation and  bring  about  adequacy  of  service  and  equality  of 
charge  to  the  public,  if  there  could  be  devised  a  civil  service, 
free  from  plunder  and  graft,  efficient  to  the  adequate  admin- 
istration of  such  vast  business. 

In  the  railways,  however,  and  other  public  utilities  is  to  be 
found,  to  a  superlative  degree,  the  concentration  of  stock 
ownership,  with  the  corollary  discrimination  in  service  and 
rates,  calculated  only  to  increase  the  power  and  wealth  of  the 
controlling  few  at  the  expense  of  the  rest  of  the  stockholders 
and  the  public  generally. 

The  concentration  of  stock  ownership  in  the  great  corpora- 
tions constitutes  an  economic  feudalism  to-day  not  dissimilar 
in  essential  respects  to  the  political  feudalism  of  centuries 
past. 

The  great  corporation,  efficient  agent  of  production,  is  in- 
deed not  to  be  destroyed  for  an  evanesc-ent  socialist  dream, 
but  the  method  of  its  control,  which  has  grown  into  an  abuse 
in  the  concentration  of  stock  ownership,  must  be  remedied  by 
a  gradual  growth  in  the  opposite  direction  by  regulations  that 
shall  have  a  compelling  tendency  toward  a  more  and  more 
widely  distributed  stock  ownership  and  control.  Just  as  the 
public  corporation  kept  alive  the  spirit  of  freedom  in  the 
Middle  Ages  and  was  largely  instrumental  in  bringing  about 
political  freedom,  so  may  the  great  private  corporation,  by 


INTRODUCTION.  14 

reason  of  its  very  efficiency  as  an  agent  of  production,  be 
made  instrumental  in  bringing  about  economic  freedom  and 
equality  of  opportunity,  but  likewise  it  must  change  from  an 
oligarchy  to  a  democracy. 

The  time  is  at  hand  when  the  political  state  should  he  di- 
vorced from  the  economic.  It  is  the  function  of  government, 
national,  state  and  municipal,  to  prescribe  and  execute  the 
rules  governing  the  acquisition,  ownership  and  disposal  of 
wealth.  Let  it  confine  itself  to  that  function,  and  in  its  per- 
formance thereof  let  it  regulate  its  creature,  the  private  cor- 
poration, so  that  its  stock  may  become,  by  natural  processes, 
in  course  of  time,  widely  and  more  widely  distributed  and 
its  control  popularized,  and  thus  may,  and  it  may  be  con- 
fidently asserted  will,  be  developed  an  economic  state  com- 
posed of  these  corporations  without  geographical  locality  or 
limit,  and  with  such  a  distributed  stock  ownership,  that  they 
will  be  at  once  the  most  efficient  instrument  of  production, 
and  a  bulwark  of  economic  freedom  and  equality  in  the  dis- 
tribution of  wealth. 

It  is  not,  however,  to  be  supposed  that  an  economic  state 
of  freedom  can  be  brought  forth  full-grow^n  at  a  leap  like 
Pallas  Athena  from  the  head  of  Jove.  It  cannot  be  too 
strongly  emphasized  that  economic  well-being  cannot  be 
brought  about  by  government  fiat,  but  only  by  patient,  per- 
sistent struggle,  as  was  political  freedom  and  like  all  good 
development  and  growth.  Government  can  do  no  more  than 
prescribe  the  rules  of  the  game.  The  people  must  struggle  in- 
dividually and  together  for  the  prize  of  economic  freedom. 
We  have  heard  of  the  rights  of  the  people  ad  nauseam.  Let 
us  hear  more  of  their  duties  to  themselves  and  one  another, 
individually  and  as  a  whole. 

Rules  or  laws  of  a  compelling  tendency  to  bring  about  a 
wider  and  gradually  wider  distribution  of  stock  ownership 
are  not  at  all  impossible  or  impracticable,  nor  would  they  be 
revolutionary  or  inconsistent  with  private  property,  and  in- 
dividual freedom  in  enterprise  and  acquisition  of  wealth. 

The  corporation  is  the  creature  of  statute,  and  in  most  cases 
to-day  is  subject  to  state  regulation,  limited  only  by  the 
vested  rights  of  individuals  and  public  policy.     The  corpora- 


15  INTRODUCTION. 

tion,  therefore,  has  none  of  the  inalienable  rights  of  the  in- 
dividual, and  the  method  of  its  control  and  stock  ownership 
is  not  a  matter  of  right  at  all,  but  of  policy  purely.  A  lim- 
itation, therefore,  of  the  amount  of  stock  to  be  owned  or  con- 
trolled by  any  individual  in  any  corporation  would,  generally 
speaking,  be  no  violation  of  any  corporate  right,  and  would 
not  be  open  to  the  several  objections  against  limiting  the 
amount  of  property  generally  to  be  acquired  by  the  indi- 
vidual, since  he  would  still  be  free  to  exercise  his  enterprise 
to  acquire  as  much  other  additional  property  as  he  could 
lawfully  become  possessed  of.  It  is  presumed  that  no  one 
will  suppose  that  a  suggestion  is  made  to  confiscate  stock- 
holdings; just  as  concentration  of  stock  has  been  a  develop- 
ment, so  wider  distribution  should  be  brought  about  grad- 
ually and  by  slow  degrees.  It  is  feasible  to  enact  and  enforce 
a  law  requiring  all  stock-holdings  of  any  individual  in  any 
single  company  in  excess  of  five  million  dollars,  e.  g.,  par  or 
market  value,  to  be  disposed  of  to  the  public  within  a  reason- 
able period  on  pain  of  condemnation  and  sale  at  an  appraised 
valuation,  and  that  all  similar  stock-holdings  in  excess  of 
three  million  dollars  be  similarly  disposed  of  within  some 
longer  period,  thus  by  degrees  reducing  the  amount  of  stock 
held  or  to  be  held  by  any  individual  in  any  one  company. 
This  would  have  the  effect  "of  bringing  the  public  in"  in  a 
way  that  would  really,  in  the  course  of  the  time  that  would 
suffice  to  bring  about  such  change,  be  beneficial  to  all, — to  the 
corporation  as  an  efficient  agent  of  production,  for  there 
would  be  a  broader  public  interest  in  its  successful  operation 
and  a  much  wider  circle  of  interested  owners  from  whom  to 
select  the  managing  trustees;  beneficial  to  the  public  to  the 
extent  of  their  greater  share  in  the  particular  corporation 
and  its  wealth-bringing  capacity, — and  really  beneficial  to 
the  present  stock  magnates,  for  the  greater  their  property 
stake  the  greater  their  real  interest  in  whatever  conduces  to 
the  permanent  public  advantage.  A  well-considered  law  of 
such  character,  generally  enacted  and  enforced,  would  be  a 
long  stride  toward  democracy  in  the  economic  state. 

Another  modification  in  our  corporation  laws,  necessary  in 
the  interest  of  the  citizen  of  average  means,  potential  if  not 


INTRODUCTION.  16 

actual  stockholder,  is  such  regulation  of  the  governing  board 
of  corporations,  while  leaving  them  wide  discretion,  as  shall 
make  of  them  not  only  directors  for  the  now  very  limited 
controlling  few,  but  really  trustees,  representing  and  respon- 
sible to  all  the  stockholders ;  and  to  that  end  they  should  be 
elected  by  groups  of  stock,  in  order  that  no  one  large  block  of 
stock  should  practically  appoint  the  whole  board;  and  fur- 
ther, they  should  be  removable  at  the  will  of  those  electing 
them,  and  should  be  held  to  account  fully,  whenever  required, 
to  any  and  all  stockholders  in  the  same  manner  as  a  trustee 
to  a  cestui  que  trust,  in  order  that  the  small  investing  stock- 
holder may  actually  feel  that  without  prolonged  legal  con- 
test he  can  readily  learn  from  time  to  time  how  the  business 
which  is  his  own  pro  tanto  is  being  conducted.  At  present, 
furthermore,  directors  are  paid  practically  nothing  for  their 
services,  and  their  main  incentive  to  advance  the  interests 
of  their  corporation  is  to  enable  them  to  manipulate  and  job 
the  stock  to  their  own  pecuniary  advantage,  very  often  to  the 
actual  sacrifice  of  the  interests  of  the  average  stockholder. 
"With  limitation  of  stock  ownership  and  making  of  directors 
actual  trustees,  the  baneful  incentive  of  stock-jobbing  and 
manipulation  should  be  replaced  by  sufficiently  large  salaries 
to  attract  men  of  first-rate  business  capacity  to  compete  for 
the  office  of  trustee  of  the  stockholders  to  manage  the  corpo- 
rate business  purely  as  such. 

One  constant  and  matter-of-course  corporate  practice,  more- 
over, the  continued  toleration  of  which  is  an  abuse  of  the  first 
magnitude,  is  little  less  than  a  reproach  to  the  intelligence 
of  the  business  community  interested,  and  which  is  especially 
conducive  to  concentration  of  stock  ownership  and  control 
and  to  coterie  manipulation  and  management  of  corporate 
concerns,  is  accumulated  proxy  voting  at  corporate  elections. 

The  ordinary  corporate  election  often  is  farcical.  At  the 
time  appointed  the  directors  interrupt  the  usual  office  routine 
and  go  through  a  formality  just  sufficient  to  warrant  a  cor- 
porate record  of  action  taken.  If  a  lone  stockholder  appears, 
he  is  eyed  askance,  given  a  cigar,  seated  in  a  corner  with  the 
morning  paper  to  read,  and  his  presence  tolerated  with 
amused  condescension  until  ennui  and  satisfied  curiosity  leads 


17  INTRODUCTION. 

him  to  depart.  The  directors,  when  the  spirit  moves  them, 
light  cigars  and  declare  the  meeting  in  session,  report  to 
themselves  in  a  satisfactory  manner  as  to  their  conduct  of 
the  corporation,  and  at  the  proper  time  declare  the  polls  open, 
produce  a  neat  bundle  of  proxies,  which  they  then  proceed 
to  vote,  declare  themselves  or  their  appointees  elected,  and 
adjourn  the  meeting.  They  sometimes  fall  out  and  a  contest 
is  precipitated,  and  honest  men  get  their  dues  to  the  extent 
of  determining  which  has  the  larger  bundle  of  proxies. 

This  is  an  abuse  developed  by  force  of  custom  from  its 
origin  in  the  inconvenience  for  the  individual  stockholder 
to  attend  meetings  in  person,  increased  in  the  case  of  bodies 
of  stockholders  living  at  great  distances  apart.  The  small 
stockholder  feels  the  inconvenience,  and  knows  that  his  indi- 
vidual vote  or  votes  will  count  little  in  influencing  the  result, 
and  further,  he  knows  that  others  similarly  situated  will  give 
their  proxies  to  the  controlling  directors,  so  that  unless  he  be 
some  contumacious  fellow,  with  an  absurd  notion  that  his 
property  interest,  though  it  be  a  small  one,  is  for  him  to  man- 
age and  dispose  of  himself,  he  tal^es  the  easiest  way  and 
joins  the  proce^ion  by  sending  his  proxy  to  the  controlling 
director. 

In  fact,  stockholders'  meetings  in  person  in  our  private 
corporations  to-day  are  as  antiquated  and  more  impracticable 
for  the  accomplishment  of  results  really  beneficial  to  the 
business  community  than  would  be  general  town  meetings 
in  the  municipal  government  of  our  great  cities. 

Furthermore,  it  is  just  as  much  for  the  interest  of  the  small 
stockholder  as  for  the  large  to  select  the  most  competent  di- 
rectors to  manage  the  corporate  business,  and  as  in  the  public 
or  municipal  corporation  all  citizens  have  equal  voting  power 
in  the  selection  of  officers,  irrespective  of  the  extent  of  their 
property  interest,  so  in  private  corporations,  in  the  election 
of  directors  at  least,  all  stockholders  should  have  an  equal 
vote,  irrespective  of  the  extent  of  their  stockholdings.  Fur- 
ther, in  public  corporations  voting  by  proxy  would  not  be 
tolerated.  It  is  no  less  absurd  in  private  corporations  that 
often  represent  business  and  public  interests  far  greater  than 


INTRODUCTION.  18 

those  of  any  but  the  greatest  municipalities.  Accumulated 
proxy  voting  ought  to  be  done  away  with  and  corporate  elec- 
tions of  directors  held  by  taking  vote  by  ballots  duly  executed 
and  collected  by  mail  from  the  stockholders,  each  stockholder 
having  one  vote  and  no  more. 

Another  important  and  very  requisite  regulation  of  corpo- 
rate conduct,  that  the  stockholders  of  a  corporation  may  be 
cognizant  of  its  affairs,  is  the  establishment  of  boards  of 
auditors  elected  directly  by  the  stockholders  and  independent 
of  the  directors,  and  these  auditors  should  have  at  all  times 
free  access  to  all  corporate  books  and  records,  and  they  should 
be  under  the  duty  to  furnish  from  time  to  time  to  all  stock- 
holders full  information  regarding  the  business  and  general 
condition  of  the  corporation,  and  any  information  whenever 
called  for  by  any  stockholder. 

Some  directors  would  throw  up  their  hands  in  horror  at 
such  auditing  as  calculated  to  lay  open  business  and  trade 
secrets  to  competitors.  But  this  is  largely  a  fictitious  bogle 
to  guard,  the  real  esoteric  mystery  which  they  would  truly 
keep  undisclosed,  namely,  their  clever  manipulations  for  their 
own  personal  unjust  enrichment. 

Still  another  respect  in  which  corporate  regulation  is  both 
feasible  and  worthy  of  serious  thought  is  one  already  adverted 
to,  namely,  the  application  of  the  principle  of  the  Statutes 
of  Mortmain  to  land-holdings  by  American  corporations.  As 
a  policy  to  be  adopted  de  novo,  the  creation  by  statute  of  fic- 
titious entities  to  hold  large  tracts  of  land  for  periods  of 
years  purely  for  speculative  purpose  would  probably  find  few 
serious  advocates.  Still,  it  is  the  undoubted  fact  that  vast 
tracts  of  land  in  various  parts  of  the  United  States,  particu- 
larly in  the  west,  are  held  by  corporations  not  only  for  specu- 
lative purposes  simply,  but  for  the  particular  purpose  of 
preventing  their  present  development  by  other  companies  or 
individuals.  The  compulsory  sale  to  the  public  of  all  lands 
held  by  corporations,  not  clearly  shown  to  be  necessary  for 
immediate  corporate  purposes,  is  feasible  without  striking 
opposition  of  private  right  or  public  policy;  indeed,  it  may 
be  doubted  if  substantial  grounds  of  public  policy  will,  in 
the  majority  of  cases,  support  land-holding  by  corporations 


X9  INTRODUCTION. 

other  than  by  way  of  lease  for  a  limited  period  of  corporate 
existence. 

The  foregoing  corrective  regulations  suggested  would  not, 
to  be  sure,  bring  about  forthwith  a  millenium  of  equality  of 
wealth,  or  otherwise  revolutionize  the  laws  of  nature  as  found 
existent  in  human  as  in  other  growth  and  evolution,  but,  en- 
acted in  well-planned  legislation,  would,  it  is  believed,  be  a 
substantial  advance  in  the  rise  of  an  economic  democracy  out 
of  the  present  freebooting,  piratical  state  of  finance  and  busi- 
ness. 

STEPHEN  A.  McINTIRE. 

Portland,  Oregon,  October  12,  1912. 


SUMMAEI 

OF 

COKPORATION  LAW. 


CHAPTER  I. 

CORPORATE  EXISTENCE. 

§  1.  In  determining  most  questions  of  corporation  law,  it  iis 
especially  conducive  to  correct  decision  always  to  keep  clearly 
in  mind  the  source  of  corporate  existence,  that  it  is  statutory 
purely,  that  a  corporation  is  wholly  the  creature  of  statute, 
and  exists,  acts,  terminates,  acquires  rights,  and  incurs  lia- 
bilities by  virtue  of  and  only  within  the  scope  and  limits  of  the 
creating  statute.  The  corporation  differs  diametrically  from 
the  common-law  partnership  in  this  particular  respect,  and 
most  of  the  legal  distinctions  between  corporations  and  part- 
nerships may  be  traced  to  this  fundamental  difference,  that 
a  partnership  is  an  association  of  individuals  who  have  as 
such,  just  as  the  individual  has,  from  time  to  time,  asserted 
certain  rights  which  have  been  recognized  by  the  common  law 
in  judicial  decision,  and  have  been  abridged  or  enlarged  from 
time  to  time  by  statute ;  while  the  corporation,  on  the  other 
hand,  does  not  exist  at  all  but  within  the  statute. 

The  characteristics  of  a  corporation  are  stated  by  Thomp- 
son, Justice,  in  Runyan  v.  Coster,  39  U.  S.  120,  repeating  sub- 
stantially the  language  of  Chief  Justice  Taney  in  Bank  of 
Augusta  V.  Earle,  38  U.  S.  517,  as  follows : 

"The  rights  and  powers  of  a  corporation  were  very  fully 
examined  and  illustrated  by  this  court  at  the  last  term  in  the 
case  of  the  Bank  of  Augusta  v.  Earle,  13  Pet.  584,  in  which 
case  and  in  various  other  cases  decided  in  this  court  a  corpo- 
ration is  considered  an  artificial  being  existing  only  in  con- 

(21). 


§  2  SUMMARY   OF   CORPORATION   LAW.  22 

templation  of  law;  and  being  a  mere  creature  of  the  law,  it 
possesses  only  those  properties  which  the  charter  of  its  creation 
confers  upon  it  either  expressly  or  as  incidental  to  its  very 
existence.  That  corporations  created  by  statute  must  depend 
for  their  powers  and  the  mode  of  exercising  them  upon  the 
true  construction  of  the  statute.  A  corporation  can  have  no 
legal  existence  out  of  the  sovereignty  by  which  it  is  created, 
as  it  exists  only  in  contemplation  of  law  and  by  force  of  the 
law ;  and  that  when  that  law  ceases  to  operate  and  is  no  longer 
obligatory,  the  corporation  can  have  no  existence.  It  must 
dwell  in  the  place  of  its  creation  and  cannot  migrate  to  an- 
other sovereignty ;  but  though  it  must  live  and  have  its  being 
in  that  state  only,  yet  it  does  not  follow  that  its  existence  will 
not  be  recognized  in  other  places,  and  its  residence  in  one  state 
creates  no  insuperable  objection  to  its  contracting  in  another. 
The  corporation  must  show  that  the  law  of  its  creation  gave 
it  authority  to  make  such  contracts,  yet,  as  in  the  case  of  a 
natural  person,  it  is  not  necessary  that  it  should  actually  exist 
in  the  sovereignty  in  which  the  contract  is  made.  It  is  suffi- 
cient that  its  existence  as  an  artificial  person  in  the  state  of 
its  creation  is  acknowledged  and  recognized  by  the  state  or 
nation  where  the  dealing  takes  place,  and  that  it  is  permitted 
by  the  laws  of  that  place  to  exercise  there  the  powers  with 
which  it  is  endowed." 

§  2.  A  corporation  is  a  person,  is  individual  and  is  an  in- 
habitant, resident  and,  for  some  purposes,  a  citizen  of  the  state 
creating  it. 

"A  corporation  created  by  a  state  to  perform  its  functions 
under  the  authority  of  that  state  and  only  suable  there, 
though  it  may  have  members  out  of  the  state,  seems  to  us  to 
be  a  person,  though  an  artificial  one,  inhabiting  and  belong- 
ing to  that  state,  and  therefore  entitled,  for  the  purpose  of 
suing  and  beinsr  sued,  to  be  deemed  a  citizen  of  that  state." 
(Wayne,  J.,  R.  R.  Co.  v.  Letson,  2  How.  (U.  S.)  555,  modify- 
ing Bank  v.  Deveaux,  5  Cranch  (U.  S.),  84.) 

"That  corporations  are  in  law,  for  civil  purposes,  deemed 
persons  is  unquestionable,  and  the  citation  from  2  Inst.  736, 
establishes  that  they  are  so  deemed  within  the  purview  of  the 
penal  statutes.  Lord  Coke  there,  in  commenting  on  the 
statute  of  31  Eliz.,  c.  7,  respecting  the  erection  of  a  cottage 
where  the  word  used  is  'no  person  shall,'  etc.,  says:  'This  ex- 
tends as  well  to  persons  politic  and  incorporate  as  to  natural 
persons  whatsoever.'  "  (Story,  J.,  in  holding  that  the  words 
"person  or  persons"  in  a  criminal  statute  included  corpora- 
tions, United  States  v.  Amedy,  11  Wheat;  (U.  S.)  411.) 


23  CORPORATE   EXISTENCE.  §  3 

"The  great  object  of  an  incorporation  is  to  bestow  the  char- 
acter and  properties  of  individuality  on  a  collective  and 
changing  body  of  men."  (Marshall,  C.  J.,  Bank  v.  Billings, 
4  Pet.  (U.  S.)  561.) 

*'In  the  jurisprudence  of  the  United  States  a  corporation 
is  regarded  as  in  effect  a  citizen  of  the  state  which  created  it." 
(Swayne,  J.,  in  St.  Louis  v.  The  Ferry  Co.,  11  Wall.  428.) 

"A  corporation  can  have  no  legal  existence  outside  of  the 
sovereignty  by  which  it  was  created.  Its  place  of  residence 
is  there,  and  can  be  nowhere  else.  Unlike  a  natural  person, 
it  cannot  change  its  domicile  at  will,  and  although  it  may  be 
permitted  to  transact  business  where  its  charter  does  not  oper- 
ate, it  cannot  on  that  account  acquire  a  residence  there." 
(Davis,  J.,  in  Insurance  Co.  v.  Francis,  11  Wall.  (U.  S.)  216.) 

§  3.  A  corporation,  if  actually  incorporated  in  different 
states,  becomes  a  resident  in  each  of  the  states  in  which  it  is  so 
incorporated. 

"The  Boston,  Hartford  and  Erie  Company,  therefore, 
though  made  up  of  distinct  corporations  chartered  by  the 
legislatures  of  different  states,  had  a  capital  stock  which  was 
a  unit  and  only  one  set  of  shareholders,  who  had  an  interest 
by  virtue  of  their  ownership  of  shares  of  such  stock  in  all  of 
its  property  everywhere.  In  its  organization  and  action  and 
the  practical  management  of  its  property  it  was  one  corpora- 
tion, having  one  board  of  directors,  though  in  its  relations  to 
any  state  it  was  a  separate  corporation,  governed  by  the  laws 
of  that  state  as  to  its  property  therein.  It  therefore  had  a 
domicile  in  each  state,  and  the  corporators  or  shareholders 
could,  in  the  absence  of  any  statutory  provision  to  the  con- 
trary, hold  meetings  and  transact  corporate  business  in  any 
one  state  so  as  to  bind  the  corporation  in  respect  to  its  prop- 
erty everywhere."  (Blatchford,  J.,  in  Graham  v.  Boston  etc. 
R.  R.  Co.,  118U.  S.  169.) 

"This  court  has  often  recognized  that  a  corporation  of  one 
state  may  be  made  a  corporation  of  another  state  by  the  legis- 
lature of  that  state  in  regard  to  property  and  acts  within  its 
territorial  jurisdiction.  Ohio  &  Mississippi  R.  R.  Co.  v. 
Wheeler,  1  Black,  286,  297;  Railroad  Co.  v.  Harris,  12  Wall. 
65,  82 ;  Railway  Co.  v.  Whitton,  13  Wall.  270,  283 ;  Railroad 
Co  V  Vance,  96  U.  S.  450,  457 ;  Memphis  &  Charleston  R.  R. 
V.  Alabama,  107  U.  S.  581;  Clark  v.  Barnard,  108  U.  S.  436, 
451  452;  Stone  v.  Farmers'  Loan  &  Trust  Co.,  116  U.  S.  307, 
334';  Graham  v.  Boston  etc.  R.  R.,  118  U.  S.  161.  169 ;  Martin 
V.  Baltimore  &  Ohio  R.  R.,  151  U.  S.  673,  677.  But  this  court 
has  repeatedly   said   that   in   order   to   make   a   corporation, 


§§4,5  SUMMARY    OP   CORPORATION   LAW.  24 

already  in  existence  under  the  laws  of  one  state,  a  corpora- 
tion of  another  state,  'the  language  used  must  imply  creation 
or  adoption  in  such  form  as  to  confer  the  power  usually  exer- 
cised over  corporations  by  the  state  or  by  the  legislature  and 
such  allegiance  as  a  state  corporation  owes  to  its  creator.  The 
mere  grant  of  privileges  or  powers  to  it  as  an  existing  corpo- 
ration does  not  do  this.'  Pennsylvania  R.  R.  v.  St.  Louis  etc. 
R.  R.,  118  U.  S.  290,  296;  Goodlett  v.  Louisville  &  Nashville 
R.  R.,  122  U.  S.  391,  405,  408 ;  St.  Louis  &  San  Francisco  Ry. 
V.  James,  161  U.  S.  545,  561."  (Grav,  J.,  in  Louisville  Ry. 
Co.  V.  Louisville  Trust  Co.,  174  U.  S.  562.) 


ORGANIZATION  OF  A  CORPORATION. 

§  4.  The  question  not  infrequently  arises  as  to  what  consti- 
tutes organization  of  a  corporation.  In  general,  it  may  be  said 
that  a  corporation  is  organized  when  enough  has  been  done 
in  compliance  with  the  statute  under  which  the  corporation 
is  formed,  so  that  the  corporation  is  in  a  position  to  perform 
corporate  acts.  In  order  that  the  corporation  may  be  in  such 
a  position  rightfully  or  de  jure,  all  antecedent  provisions  of 
the  statute  must  have  been  complied  with,  but  if  no  statutory 
provision  has  been  neglected,  though  not  strictly  complied  with, 
and  the  formation  of  the  corporation  has  progressed  to  the 
stage  where  officers  or  official  representatives  have  been  ap- 
pointed who  may  perform  acts  in  the  corporate  name,  the  cor- 
poration may  be  said  to  be  organized  at  least  de  facto. 

§  5.  In  McGuty  v.  Athol  Reservoir  Co.,  155  Mass.  183, 
where  only  one  of  the  persons  named  in  the  certificate  met  with 
others  and  adopted  by-laws  and  chose  officers,  it  was  held  that 
they  constituted  a  corporation.     Morton,  J.,  said: 

"At  least  one  of  the  persons  named  in  the  act  of  incorpo- 
ration, without  objections,  so  far  as  appears,  from  the  others, 
with  seven  persons  not  named  in  the  act,  duly  met  on  June 
21,  1854,  and  accepted  the  act  of  incorporation,  adopted  by- 
laws, chose  officers  and  transacted  other  business.  It  is  clear 
that  the  persons  who  took  part  in  these  proceedings  became 
a  corporation  under  the  name  of  'The  Athol  Reservoir  Com- 
pany.' " 

In  Braintree  Water  Supply  Co.  v.  Braintree,  146  Mass. 
482,  where,  under  an  act  of  incorporation,  all  the  members 


25  CORPORATE  EXISTENCE.  §  6 

united  in  electing  directors  and  a  president,  though  statutory 
notice  was  omitted,  the  corporation  was  held  to  be  organized. 

In  Ossipee  Hosiery  &  Woolen  Mfg.  Co.  v.  Canney,  54  N.  H. 
295,  where  the  first  meeting  was  called  on  fourteen  instead  of 
fifteen  days'  notice  required  by  statute,  and  by-laws  adopted 
and  a  clerk  chosen,  it  was  held  that  the  corporation  was  ' '  or- 
ganized as  a  company"  under  the  act. 

In  Judah  v.  American  Live  Stock  Ins.  Co.,  4  Ind.  333, 
where  stock  had  been  subscribed  and  directors  elected  by  all 
the  stockholders,  though  commissioners  did  not,  as  required, 
receive  subscriptions  and  call  the  meeting  of  stockholders,  the 
company  was  held  legally  organized. 

In  Hunt  V.  Kansas  &  M.  Bridge  Co.,  11  Kan.  412,  where 
persons  named  in  the  act  of  incorporation  opened  books  for 
subscription  to  the  capital  stock  of  the  company,  and  ten  per 
cent  was  subscribed  and  an  election  of  directors  and  officers 
was  held  as  required  by  the  act,  the  company  was  legally 
organized  for  the  transaction  of  business. 

In  Union  Water  Co.  v.  Kean,  52  N.  J.  Eq.  Ill,  where  notice 
of  the  opening  of  subscription  books  was  given  and  the  stock 
was  subscribed  by  the  incorporators  and  a  stockholders'  meet- 
ing was  held  and  directors  and  officers  elected,  the  corpora- 
tion was  held  sufficiently  organized  to  institute  suit. 

§  6.  In  Walton  v.  Oliver,  49  Kan.  107,  where  nothing 
was  done  but  to  file  a  charter  naming  certain  persons  as 
directors  for  the  first  year,  it  was  held  that  there  was  no 
organization  sufficient  to  enable  the  corporation  to  do  busi- 
ness, the  court  construing  "organized"  to  require  the  election 
of  officers,  the  subscription  and  payment  of  the  capital  stock, 
the  adoption  of  by-laws,  and  such  steps  as  are  necessary  to 
endow  the  legal  entity  with  the  capacity  to  transact  the  legit- 
imate business  for  which  it  was  created. 

In  McVicker  v.  Cane,  21  Or.  353,  nothing  appeared  to  have 
been  done  but  the  filing  of  the  articles  of  incorporation,  and 
this  was  held  not  enough  to  create  a  corporate  entity  with 
power  to  contract  and  transact  business.     Lord,  J.,  said: 

"In  the  case  at  bar  there  was  no  stock,  nor  subscription  of 
stock,  nor  officers  nor  board  of  directors,  nor  anything  done 


§  7  SUMMARY   OF   CORPORATION    LAW.  26 

to  perfect  the  organization.  It  is  true  that  the  whole  amount 
of  stock  is  not  required  to  be  subscribed  to  entitle  the  corpora- 
tion to  proceed  with  the  organization ;  but  the  amount  pro- 
vided by  section  3222,  Hill's  Code,  must  be  subscribed  before 
the  corporation  can  be  legally  organized.  (Coyote  etc.  v. 
Ruble,  8  Or.  284.)  In  the  case  last  cited,  Kelly,' C.  J.,  said: 
'Where  the  statute  prescribes  the  manner  in  which  the  cor- 
poration shall  be  organized,  its  requirements  must  be  substan- 
tially complied  with,  otherwise  it  will  have  no  legal  capacity 
to  transact  any  business  as  a  corporation.'  " 

Similarly,  Western  Screw  &  Mfg.  Co.  v.  Causley,  72  111. 
531. 

§  7.  In  Roosevelt  v.  Hamblin,  199  Mass.  127,  in  holding  that 
corporate  franchises  belonged  to  the  incorporators  before  or- 
ganization and  afterward  to  the  corporation,  Hammond,  J., 
said: 

"In  the  cas'C  before  us  it  does  not  appear  that  there  were 
any  subscribers  to  the  stock  before  the  date  of  the  act  of  in- 
corporation. The  franchise,  therefore,  was  held  by  the  thir- 
teen incorporators  specifically  named  therein.  It  is  neces- 
sarily implied  in  the  act  that  the  franchise  does  not  remain 
in  the  incorporators  after  the  corporation  is  organized;  and 
we  are  of  opinion  that  within  the  meaning  of  this  statute,  and 
for  the  transfer  of  the  franchise,  the  corporation  must  be 
regarded  as  organized  when  the  first  meeting  has  been  called, 
the  act  of  incorporation  accepted,  the  officers  elected  and  by- 
laws providing  for  future  meetings  adopted,  at  least  where 
there  are  any  stockholders." 

In  Lechmere  Bank  v.  Boynton,  11  Cush.  (Mass.)  369, 
where  a  special  charter  for  a  bank  was  granted  certain  "peti- 
tioners and  their  associates,"  it  was  held  that  subscribers  to 
stock  other  than  those  signing  the  petition  for  the  charter 
were  not  entitled  to  participate  in  the  organization  of  the 
bank.     Shaw,  C.  J.,  said : 

"Association  ex  vi  termini  implies  agreement,  compact, 
union  of  mind  and  purpose  and  action.  When,  as  above 
stated,  it  includes  those  who  are  to  come  in  afterward,  either 
together  with,  or  as  successors  to,  the  original  grantees,  it  is 
by  a  compact  between  the  party  who  desires  to  come  in,  on 
the  one  hand,  and  the  corporation  who  consents  to  receive 
him  on  the  other.     One  of  the  powers  granted  is  to  receive 


27  CORPORATE   EXISTENCE.  §  7 

associates  and  provide  for  a  succession  of  members.  But  the 
right  to  receive  associates  is  a  corporate  right,  to  be  exercised, 
like  other  corporate  powers,  by  a  majority,  if  not  otherwise 
regulated.  But  the  exercise  of  a  corporate  right  presupposes 
a  previous  corporate  organization,  and  therefore  until  such 
organization,  there  can  be  no  such  associates,  and  therefore 
no  such  one  can  act  in  the  organization,  although  invited  to 
do  so  by  some,  or  even  a  majority,  of  individual  grantees." 

The  articles  and  other  certificates  required  by  law  must 
be  filed  in  order  that  a  corporate  entity  may  be  legally 
brought  into  existence.  (Capps  v.  Hastings  Prospecting  Co., 
40  Neb.  470;  Edwards  v.  Armour  Packing  Co.,  190  111.  67; 
Rikhofe  V.  Machine  Co.,  68  Ind.  388.) 


§  18  SUMMARY   OF   CORPORATION  LAW.  28 


CHAPTER  II. 

CORPORATIONS  DE  JURE  AND  DE  FACTO. 

§  18.  Where  the  conditions  and  requirements  of  the  law, 
whether  general  or  by  way  of  special  charter,  are  substantially 
complied  with  in  its  formation,  the  corporation  exists  de  jure. 

"It  was  said  in  People  v.  Selfridge,  52  Cal.  331:  'The  right 
to  be  a  corporation  is  in  itself  a  franchise,  and  to  acquire  a 
franchise  under  a  general  law  the  prescribed  statutory  condi- 
tions must  be  complied  with.'  Still,  a  substantial  rather  than 
a  literal  compliance  will  suffice.  People  v.  Stockton  &  V.  R. 
Co.,  45  Cal.  313.  Was  there  substantial  compliance  in  this 
case?  Because  a  substantial  compliance  will  do  it  does  not 
follow  that  any  positive  statutory  requirement  can  be  omitted 
on  the  ground  that  it  is  unimportant.  They  are  conditions 
precedent  to  acquiring  a  statutory  right,  and  none  can  be 
dispensed  with  by  the  court.  WTiat  is  a  substantial  rather 
than  a  literal  compliance  may  be  illustrated  from  the  cases. 
In  Ex  parte  Spring  Valley  Water  Works,  17  Cal.  132,  the  cer- 
tificate stated  the  place  of  business,  but  did  not  describe  it  as 
the  'principal  place  of  business,'  as  required.  The  court  said: 
'The  statement  that  San  Francisco  was  the  place  of  bu.siness 
w^ould  seem  to  imply  that  it  was  not  only  the  principal  but 
the  only  place  of  business.'  In  People  v.  Stockton  &  V.  R. 
Co.,  45  Cal.  306,  the  affidavit  required  in  such  cases  to  be  at- 
tached to  the  certificate  stated  that  ten  per  cent  of  the  amount 
subscribed  had  been  actually  paid  in,  omitting  the  words  'in 
good  faith,'  which  the  statute  required.  In  the  certificate  it 
was  stated  that  more  than  ten  per  cent  had  been  actually  in 
good  faith  paid  in.  It  was  held  sufficient,  and  it  would  seem 
that  if  it  was  actually  paid  in  cash  it  must  have  been  paid  in 
good  faith;  and  it  was  further  held  that  payment  by  checks 
drawn  against  sufficient  funds  in  a  bank  which  was  ready  to 
accept  and  pay  the  checks  was  substantially  payment  in  cash. 
In  People  v.  Cheeseman,  7  Colo.  376,  the  acknowledgment 
taken  by  the  notary  omitted  to  state  that  the  persons  whose 
acknowledgments  were  taken  were  personally  known  to  the 
notary.  The  certificate  did  state  that  the  persons  who  signed 
appeared  before  him  and  acknowledged  it.  The  statute  did 
not  prescribe  what  the  acknowledgment  should  contain,  and  it 
was  held  a  substantial  compliance  with  the  requirement,  al- 
though the  form  prescribed  for  acknowledgment  of  deeds  was 


29  CORPORATIONS  DE  JURE  AND  DE  FACTO.         §  19 

not  followed.  It  was  acknowledged.  In  all  these  cases  it  will 
be  seen  that  the  thing  reqviired  was  done  but  not  literally  as 
directed,  but  there  was  no  omission  of  any  requirement." 
(Temple,  C,  in  People  v.  Monteeito  Water  Co.,  97  Cal.  276.) 

§  19.  Where  an  association  is  not  a  corporation  de  jure,  but 
has  acted  as  a  corporation,  and  enough  has  been  done  in  com- 
pliance with  statutory  requirements  so  that  the  public  is  rea- 
sonably justified  in  dealing  with  it  as  a  corporation,  and  it 
would  be  inequitable  to  treat  the  corporation  as  a  nullity,  such 
an  association  is  regarded  and  held  a  corporation  de  facto,  sub- 
ject to  be  questioned  as  to  its  corporate  existence  only  by  the 
state  in  a  proceeding  instituted  for  that  purpose. 

In  Buffalo  &  Alleghany  R.  Co.  v.  Gary,  26  N.  Y.  75,  an 
action  on  a  stock  subscription,  Denio,  C.  J.,  said: 

"The  defendant  contends  that  the  plaintiff's  organization 
is  defective  because  the  affidavit  annexed  to  the  articles  of 
association  does  not  contain  the  allegation  required  by  the 
statute  'that  it  is  intended  in  good  faith  to  construct  or  to 
maintain  and  operate  the  road  mentioned  in  the  articles  of 
association,'  and  that  it  is  not,  therefore,  a  corporation.  _  The 
articles  of  association  are  in  due  form,  and  the  affidavit  an- 
nexed to  them,  while  it  does  not  come  up  to  the  requirement 
of  the  statute  in  the  particular  specified,  is  colorable.  The 
articles  and  affidavit  were  filed  and  recorded  in  the  office  of 
the  Secretary  of  State ;  the  capital  stock  was  subscribed  and 
partly  paid  in;  the  route  of  the  road  was  surveyed  and 
located;  the  right  of  way  obtained;  a  contract  for  the  con- 
struction of  the  whole  road  entered  into  and  liabilities  in- 
curred which  have  not  been  satisfied.  This  was  sufficient  to 
constitute  the  plaintiff  a  corporation  de  facto,  so  that  neither 
it  nor  its  stockholders  can  object  that  it  is  not  strictly  a  corpo- 
ration de  jure.  I  am  of  the  opinion  that  under  this  and 
similar  general  acts  for  the  formation  of  corporations,  if  the 
papers  filed  by  which  the  corporation  is  sought  to  be  created 
are  colorable,  but  so  defective  that  in  a  proceeding  on  the  part 
of  the  state  against  it,  it  would  for  that  reason  be  dissolved, 
yet  by  acts  of  user  under  such  an  organization  it  becomes  a 
corporation  de  facto,  and  no  advantage  can  be  taken  of  such 
defect  in  its  constitution  collaterally  by  any  person.  Any 
other  rule,  it  seems  to  me,  must  be  fraught  with  serious  con- 
sequences and  great  public  mischief.  Most  of  the  persons 
who  subscribe  in  good  faith  for  the  stock  do  not  examine  to 
see  whether  all  the  requirements  of  the  statute  in  the  organ- 


§  20  SUMMARY   OP  CORPORATION  LAW.  30 

ization  of  the  corporation  have  been  complied  with;  and  if 
they  did  examine  Avould  not  probably  discover  a  defect  like 
the  one  now  pointed  out.  The  stock  is  sold  in  the  market 
from  hand  to  hand  without  any  such  examination.  The  cor- 
poration may  carry  on  its  business  for  years  and  its  stock  have 
entirely  changed  hands  when  its  property  may  be  destroyed 
by  a  trespasser,  and  in  an  action  atjainst  him  in  the  name  of 
the  corporation  his  only  defense,  'you  are  not  legally  a  corpo- 
ration by  reason  of  a  defect  in  your  constitution,'  would,  upon 
the  doctrine  contended  for  by  the  defendant,  be  successful. 
The  doctrine  of  estoppel  could  not  be  applied  in  that  case,  as 
it  has  been  in  some  cases,  to  counteract  an  erroneous  decision 
upon  the  question  now  before  us." 

§  20.  In  an  action  to  foreclose  a  mortgage,  Society  Perun 
V.  Cleveland,  43  Ohio  St.  481,  Owen,  J.,  said: 

"It  is  conceded  by  the  city  that  parties  who  had  recognized 
the  existence  of  the  society  by  their  transactions  with  it  as  a 
supposed  corporation  are  estopped  to  deny  its  corporate  ex- 
istence. But  it  is  maintained  that  the  city  having  engaged 
in  no  transactions  with  it  is  free  to  challenge  its  existence  as 
a  corporation  de  facto  as  well  as  de  jure.  The  argument  is 
that  'No  case  can  be  found  where  it  is  held  that  there  is  a 
corporation  de  facto  against  persons  who  have  in  no  way 
recognized  its  existence  as  a  corporation,'  and  that  'The 
notion  of  a  de  facto  corporation  is  based  on  the  doctrine  of 
estoppel ;  when  estoppel  cannot  be  invoked  there  can  be  no  de 
facto  corporation.' 

"The  theory  that  a  de  facto  corporation  has  no  real  existence, 
that  it  is  a  mere  phantom,  to  be  invoked  only  by  that  rule  of 
estoppel  which  forbids  a  party  who  has  dealt  with  a  pretended 
corporation  to  deny  its  corporate  existence,  has  no  foundation 
either  in  reason  or  authority.  A  de  facto  corporation  is  a 
reality.  It  has  an  actual  and  substantial  legal  existence.  It 
is,  as  the  term  implies,  a  corporation. 

"It  is  a  self-evident  proposition  that  a  contract  cannot  be 
made  with  a  corporation  unless  the  corporation  be  in  existence 
at  the  time.  A  real  contract  with  an  imaginary  corporation 
is  as  impossible  in  the  nature  of  things  as  a  real  contract  with 
an  imaginary  person.  It  is  essential,  therefore,  in  order  to 
establish  the  existence  of  a  contract  with  a  corporation,  to 
show  that  the  corporation  was  in  existence,  at  least  de  facto, 
at  the  time  the  contract  was  made.  (Morawetz  on  Private 
Corporations,  sec.  137.) 


31  CORPORATIONS  DE  JURE  AND  DE  FACTO.         §  21 

"It  is  bound  by  all  such  acts  as  it  might  rightfully  perform 
as  a  corporation  de  jure.  Where  it  has  attempted  in  good 
faith  to  assume  corporate  powers;  where  its  proceedings  in 
that  behalf  are  colorable  and  are  approved  by  those  officers 
of  the  state  who  are  authorized  to  act  in  that  regard;  where 
it  has  honestly  proceeded  for  a  number  of  years,  without  in- 
terference from  the  state,  to  transact  business  as  a  corpora- 
tion, has  been  reputed  and  dealt  with  as  a  duly  incorporated 
body,  and  valuable  rights  and  interests  have  been  acquired 
and  transferred  by  it,  no  substantial  reason  is  suggested  why 
its  corporate  existence  in  a  suit  involving  such  transactions 
should  be  subject  to  attack  by  any  other  party  than  the  state, 
and  then  only  when  it  is  called  upon,  in  a  direct  proceeding 
for  that  purpose,  to  show  by  what  authority  it  assumes  to  be 
a  corporation." 

Nelson,  J.,  in  Lessee  of  Frost  v.  Frostburg  Coal  Co.,  24 
How.  (U.  S.)  283,  said: 

"The  defendants  were  made  a  corporation  by  the  charter, 
the  persons  named  in  it  constituting  the  corporate  body, 
clothed  with  the  powers  and  privileges  conferred  upon  it,  and 
were  capable  of  taking  and  holding  real  estate ;  and,  second, 
even  if  it  were  otherwise  and  some  irregiilarities  occurred  in 
the  organization  of  the  company,  inasmuch  as  no  act  made  a 
condition  precedent  to  the  existence  of  the  corporation  has 
been  omitted  or  its  nonperformance  shown,  a  party  dealing 
with  the  company  is  not  permitted  to  set  up  the  irregularity. 
The  courts  are  bound  to  regard  it  as  a  corporation,  so  far  as 
third  persons  are  concerned,  until  it  is  dissolved  by  a  judicial 
proceeding  on  behalf  of  the  government  that  created  it." 


LIABILITY    OF     STOCKHOLDERS     OF     DE     FACTO 
CORPORATION. 

§  21.  Though  enough  has  been  done  to  constitute  a  corpora- 
tion de  facto,  yet  the  franchise  rights  recognized  as  existing  de 
facto  may  be  forfeited  by  quo  warranto  proceedings  on  behalf 
of  the  state.  (Cook,  6th  ed.,  §  231.)  While  in  the  earlier 
decisions  and  books  there  was  much  diversity  upon  the  point 
whether  stockholders  of  de  facto  corporations  were  liable  as 
partners,  as  if  no  corporation  had  been  formed  (Cook,  1st 
ed.,  §  233,  17  L.  R.  A.  549n),  the  general  rule  now  is  estab- 
lished that  if  enough  has  been  done  to  constitute  a  de  facto 


§  21  SUMMARY   OF    CORPORATION   LAW.  82 

corporation,  the  stockholders  are  liable  only  as  such  and  not 
as  partners. 

In  Whitney  v.  Wyman,  101  U.  S.  392,  in  holding  that  the 
defendants  in  that  case,  who,  as  officers,  directors  and  stock- 
holders of  a  de  facto  corporation,  had  entered  into  a  contract 
with  the  plaintiff,  in  the  name  of  the  de  facto  corporation,  were 
not  individually  liable  on  the  contract,  Swayne,  J.,  in  the 
opinion  of  the  court,  said: 

"The  court  instructed  the  jury,  in  substance,  that  the  letter 
of  the  Prudential  Committee  of  February  1,  1870,  bound  the 
corporation  and  not  the  defendants,  if  there  was  then  a  cor- 
poration, and  the  defendants  were  authorized  by  it  to  give  the 
order,  and  that  if  the  corporation  had  acted  as  such  and  ex- 
ercised its  franchises,  then  it  was  a  corporation  de  facto,  and 
that  in  such  case  any  irregularity  in  its  organization  was  im- 
material. 

"The  plaintiff  excepted  to  these  instructions,  and  took 
numerous  other  exceptions  in  the  course  of  the  trial,  which 
are  set  forth  in  the  record. 

"The  jury  found  for  the  defendants;  and  judgment  having 
been  entered  for  them,  Whitney  removed  the  case  here 

"Looking  at  the  letter  of  the  defendants  of  the  1st  of  Feb- 
ruary, 1869,  and  the  answer  of  the  plaintiff  of  the  10th  of  that 
month,  we  cannot  doubt  as  to  the  understanding  and  meaning 
of  both  parties  with  respect  to  the  point  in  question. 

"The  former  advised  the  latter  of  the  progress  made  in  or- 
ganizing the  corporation ;  that  the  order  was  given  by  the  direc- 
tion of  its  officers,  and  the  letter  is  signed  by  the  writers  as 
the  'Prudential  Committee  of  the  Grand  Haven  Fruit-basket 
Co.,*  which  was  the  name  in  full  of  the  corporation.  The 
plaintiff  addressed  his  reply  to  the  'Grand  Haven  Fruit-basket 
Company,'  thus  using  the  name  of  the  corporation  as  the  party 
v\'ith  whom  he  knew  he  was  dealing,  and  omitting  the  names 
of  the  defendants,  and  their  designation  as  a  committee,  ac- 
cording to  the  style  they  gave  themselves  in  their  letter. 

"It  seems  to  us  entirely  clear  that  both  parties  understood 
and  meant  that  the  contract  was  to  be,  and  in  fact  was,  with 
the  corporation,  and  not  with  the  defendants  indi\adually. 

"The  agreement  thus  made  could  not  be  afterward  changed 
bv  either  of  the  parties  without  the  consent  of  the  other. 
(Utley  V.  Donaldson,  94  U.  S.  29.) 

"But  it  is  said  the  corporation  at  the  date  of  these  letters 
was  forbidden  to  do  any  business,  not  having  then  filed  its 
articles  of  association,  as  required  by  the  statute. 

"To  this  objection  there  are  several  answers. 


33  COKPORATIONS  DE  JURE  AND  DE  FACTO.         §  21 

"The  corporation  subsequently  ratified  the  contract  by 
recognizing  and  treating  it  as  valid. 

"This  made  it  in  all  respects  what  it  would  have  been  if  the 
requisite  corporate  power  had  existed  when  it  was  entered 
into.     (Angell  &  Ames,  Corp.,  sec.  804  and  note.) 

"The  corporation  having  assumed  by  entering  into  the  con- 
tract with  the  plaintiff  to  have  the  requisite  power,  both  par- 
ties are  estopped  to  deny  it.     (Id.,  sec.  635  and  note.) 

* '  The  restriction  imposed  by  the  statute  is  a  simple  inhibi- 
tion. It  did  not  declare  that  what  was  done  should  be  void, 
nor  was  any  penalty  prescribed.  No  one  but  the  state  could 
object.  The  contract  is  valid  as  to  the  plaintiff,  and  he  has 
no  right  to  raise  the  question  of  its  invalidity.  (National 
Bank  V.  Matthews,  98  U.  S.  621.) 

"The  instruction  given  by  the  court  to  the  jury  with  re- 
spect to  acts  of  user  by  the  corporation  in  proof  of  its  exist- 
ence was  correct.  If  there  was  any  error,  it  was  in  favor  of 
the  plaintiff.  (Angell  &  Ames,  Corp.,  sec.  635.)"  (Mora- 
wetz,  §  748 ;  Rutherford  v.  Hill,  22  Or.  218,  17  L.  R.  A.  549 ; 
Love  V.  Ramsay,  139  Mich.  47 ;  Webb  v.  Rockefeller,  195  Mo. 
57;  Larned  v.  Beal,  65  N.  H.  184;  Doty  v.  Patterson,  155  Ind. 
60;  Crowder  v.  Sullivan,  128  Ind.  486;  Curtis  v.  Meeker, 
169  111.  233 ;  Johnson  v.  Okerstrom,  70  Minn.  303 ;  Vanneraan 
V.  Young,  52  N.  J.  L.  403;  Bates  v.  Wilson,  14  Colo.  140; 
Snider 's  Sons  Co.  v.  Trov,  91  Ala.  224;  Mokelumne  Hill 
Min.  Co.  v.  Woodbury,  14  Cal.  424 ;  Tarbell  v.  Page,  24  111. 
46;  Demarest  v.  Flack,  128  N.  Y.  205;  Cook,  6th  ed.,  §  233.) 

But  where  no  law  authorizes  the  attempted  corporation,  or 
if  a  law  exists  under  which  a  corporation  might  be  formed, 
but  no  substantial  bona  fide  colorable  attempt  has  been  made 
by  the  association  to  comply  with  the  law,  or  fraud  or  legal 
wrongdoing  taints  the  attempted  formation,  those  stock- 
holders or  members  responsible  will  be  held  liable  as  part- 
ners. (Eaton  V.  Walker,  76  Mich.  579;  Booth  v.  Wonderly, 
36  N.  J.  L.  250;  Hill  v.  Beach,  12  N.  J.  Eq.  31;  McGrew  v. 
Exchange,  85  Tenn.  572;  Kaiser  v.  Lawrence  Sav.  Bank,  56 
Iowa,  104 ;  Bigelow  v.  Gregory,  73  111.  197 ;  Medill  v.  Collier, 
16  Ohio  St.  599;  Hurt  v.  Salisbury,  55  Mo.  310;  Ferris  v. 
Thaw,  72  Mo.  446;  Garnett  v.  Richardson,  35  Ark.  144, 
Abbott  V.  Omaha  Smelt.  &  Ref .  Co.,  4  Neb.  416 ;  McVicker  v. 
Cone,  21  Or.  353;  Coleman  v.  Coleman,  78  Ind.  344;  New 
York  etc.  Bank  v.  Crowell,  177  Pa.  313.  For  further  author- 
ities, see  Cook,  6th  ed.,  §§  230-243;  17  L.  R.  A.  549.) 
3 


32  SUMMARY   OF   CORPORATION   LAW.  34 


CHAPTER  III. 

CHARTER  POWERS. 

§  32.  The  creation  of  a  corporation  is  a  franchise  a^'ant — a 
delegation  of  governmental  power  to  the  body  corporate  to  act 
and  govern  itself  under  by-laws  and  otherwise,  and  is  strictly 
construed. 

"The  essential  properties  of  corporate  existence  are  quite 
distinct  from  the  franchises  of  the  corporation.  The  fran- 
chise of  being  a  corporation  belongs  to  the  corporators,  while 
the  powers  and  privileges  vested  in  and  to  be  exercised  by  the 
body  corporate  as  such  are  the  franchises  of  the  corporation. 
The  latter  has  no  power  to  dispose  of  the  franchise  of  its  mem- 
bers which  may  survive  in  the  mere  fact  of  corporate  existence 
after  the  corporation  has  parted  with  all  its  property  and  all 
its  franchises."  (Matthews,  J.,  in  Memphis  R.  R.  Co.  v.  Com- 
missioners, 112  U.  S.  619.) 

In  holding  that  a  state  could  not  tax  franchises  granted  by 
Congress  without  the  consent  of  Congress,  Bradley,  J.,  in  Cali- 
fornia V.  Pacific  R.  R.  Co.,  127  U.  S.  1,  40,  said : 

"Assuming,  then,  that  the  Central  Pacific  Railroad  Com- 
pany has  received  the  important  franchises  referred  to  by 
grant  of  the  United  States,  the  question  arises  whether  they 
are  legitimate  subjects  of  taxation  by  the  state.  They  were 
granted  to  the  company  for  national  purposes  and  to  subserve 
national  ends.  It  seems  very  clear  that  the  state  of  California 
can  neither  take  them  away  nor  destroy  nor  abridge  them  nor 
cripple  them  by  onerous  burdens.  Can  it  tax  them?  It  may 
undoubtedly  tax  outside  visible  property  of  the  company  situ- 
ated within  the  state.  That  is  a  different  thing.  But  may 
it  tax  franchises  which  are  the  grant  of  the  United  States? 
In  our  judgment  it  cannot.  What  is  a  franchise  ?  Under  the 
English  law,  Blackstone  defines  it  as  'a  royal  privilege  or 
branch  of  the  king's  prerogative  subsisting  in  the  hands  of  a 
subject.'  2  Bl.  Com.  37.  Generalized  and  devested  of  the 
special  form  which  it  assumes  under  a  monarchical  govern- 
ment based  on  feudal  traditions,  a  franchise  is  a  right,  privi- 
lege or  power  of  public  concern  which  ought  not  to  be  exer- 
cised by  private  individuals  at  their  mere  will  and  pleasure, 
but  should  be  reserved  for  public  control  and  administration 
either  by  the  governmeut  directly  or  by  public  agents  acting 


35  CHARTER   POWERS.  §  33 

under  such  conditions  and  regulations  as  the  government  may 
impose  in  the  public  interest  and  for  the  public  security. 
Such  rights  and  powers  must  exist  under  every  form  of 
society.  They  are  always  educed  by  the  laws  and  customs 
of  the  community.  Under  our  system  their  existence  and  dis- 
posal are  under  the  control  of  the  legislative  department  of 
the  government,  and  they  cannot  be  assumed  or  exercised 
without  legislative  authority.  No  private  person  can  estab- 
lish a  public  highway,  or  a  public  ferry  or  railroad,  or  charge 
tolls  for  the  use  of  the  same,  without  authority  from  the  legis- 
lature direct  or  derived.  These  are  franchises.  No  private 
person  can  take  another's  property,  even  for  a  public  use, 
without  such  authority;  which  is  the  same  as  to  say  that  the 
right  of  eminent  domain  can  only  be  exercised  by  virtue  of 
a  legislative  grant.  This  is  a  franchise.  No  persons  can 
make  themselves  a  body  corporate  and  politic  without  legis- 
lative authority.  Corporate  capacity  is  a  franchise.  The  list 
might  be  continued  indefinitely." 

§  33.  The  express  statutory  authority  under  and  by  which 
a  corporation  is  created  and  exists  is  termed  the  charter  of  the 
corporation.  Where  the  incorporation  is  by  special  law,  the 
charter  is  the  special  act  incorporating  the  company  and  its 
amendments;  where  the  incorporation  is  by  general  law,  the 
charter  of  the  company  is  the  general  law  and  the  certification 
by  the  duly  authorized  public  officer  showing  the  scope  and 
character  of  the  company  in  the  compliance  with,  and  accept- 
ance of,  that  general  law  by  the  incorporators  of  the  company. 

''This  charter  of  the  Northeastern  Company  as  it  existed  in 
1863  was  based  upon  the  two  acts  of  the  legislature  passed  in 
1851  and  1855,  respectively.  The  first  act  was  entitled  an 
'act  to  incorporate'  the  Northeastern  Company.  The  latter 
act  was  entitled  'an  act  to  amend  the  charter  of  the  North- 
eastern Company.'  A  charter  in  the  sense  here  used  is  an 
instrument  or  authority  from  the  sovereign  power  bestowing 
rights  or  privileges;  as  it  is  briefly  expressed,  it  is  an  act  of 
incorporation.  Such  was  the  obvious  understanding  of  the 
word  by  the  legislature  of  South  Carolina.  The  first  act  was 
expressed  as  creating  the  incorporation  of  the  company.  The 
second,  using  a  synonymous  expression,  purported  to  amend 
its  charter.  The  words  'charter'  and  'act  of  incorporation' 
were  used  convertibly.  Whether  it  be  said  that  the  rights  and 
privileges  conferred  upon  the  Northeastern  as  they  stood  in 
1863  existed  in  its  charter  or  were  derived  from  its  incorpo- 


§  34  SUMMARY   OF   CORPORATION   LAW.  36 

ration  amounts  to  the  same  thing.  We  have  no  doubt  that 
all  of  them  were  intended  to  be  granted  to  the  Cheraw  Com- 
pany by  the  act  of  that  year.  The  charter  or  incorporation 
of  1851  had  been  amended  in  1855  and  by  an  act  which  pur- 
ported in  its  title  not  to  create  an  original  authority,  but  by 
amending  the  original  charter  to  bestow  additional  powers 
upon  the  company.  After  the  passage  of  the  amended  act 
the  Northeastern  was  in  law  as  if  it  had  originally  been  char- 
tered with  all  the  rights,  powers  and  privileges  conferred 
upon  it  by  the  act  of  1855."  (Hunt,  J.,  in  Humphrey  v. 
Pegues,  83  U.  S.  248.) 

§  34.  The  principle  is  not  different  in  cases  of  incorpora- 
tion under  general  law. 

"All  these  statutes  [general  incorporation  laws]  were  com- 
plete as  laws  when  they  came  from  the  hands  of  the  legis- 
lature, and  did  not  depend  for  their  force  and  efficacy  upon 
the  action  or  will  of  any  other  power.  It  is  true  that  they 
could  only  take  effect  upon  the  happening  of  some  event,  such 
as'  the  filing  the  petition  or  declaration  and  giving  publicity 
to  the  purpose  of  the  association  in  the  mode  prescribed  by 
the  act.  But  if  this  were  a  good  reason  for  regarding  these 
statutes  as  invalid,  then  how  few  corporations  could  abide  the 
test !  For  it  requires  the  acceptance  of  the  charter  to  create 
a  corporate  body,  for  the  government  cannot  compel  persons 
to  become  an  incorporated  body  without  their  consent,  and 
this  consent,  either  express  or  implied,  is  generally  subsequent 
in  point  of  time  to  the  creation  of  the  charter.  And  yet  no 
charter  that  we  are  aware  of  has  been  ad.iudged  invalid  be- 
cause the  law  creating  it  and  previously  defining  its  powers, 
rights,  capacities  and  liabilities  did  not  take  effect  until  the 
acceptance  of  the  corporate  body,  or  at  least  a  majority  of 
them,  was  signified."  (Lumpkin,  J.,  in  Franklin  Bridge  Co. 
V.  Wood,  14  Ga.  80.) 

The  corporation  comes  into  existence  on  acceptance  of  the 
express  statutory  authority  constituting  the  charter. 

"The  simple  enactment  of  the  charter  for  the  corporation 
by  the  legislature  did  not  create  the  corporation.  It  required 
one  act  on  the  part  of  the  persons  named  in  the  charter  to 
do  that,  viz.,  acceptance  of  the  charter  enacted.  Sa3^s  Grant 
in  his  work  on  Corporations,  vide  page  13 :  'Nor  can  a  charter 
be  forced  on  any  body  of  persons  who  do  not  choose  to  accept 
it';  and  again,  at  page  18,  he  says:  'The  fundamental  rule  is 
this:  no  charter  of  incorporation  is  of  any  effect  until  it  is 


37  CHARTER   POWERS.  §§35,36 

accepted  by  a  majority  of  the  grantees  or  persons  who  are 
to  be  the  corporators  under  it.'  "  (Perkins,  J.,  in  State  v. 
Dawson,  16  Ind.  40.) 

§  35.  The  rights  and  powers  of  a  corporation  arise  ex- 
pressly or  by  necessary  implication  out  of  its  charter.  The 
charter  is  a  contract  which  by  the  constitution  of  the  United 
States  and  as  well  by  the  constitutions  of  certain  states  may 
not  be  impaired  in  its  obligations  by  any  state  law,  unless  the 
power  of  amendment,  alteration  or  repeal  is  reserved  by  the 
state  creating  the  corporation  and  prior  thereto.  The  charter 
is  construed  strictly  against  the  corporation  to  the  extent  that 
the  right  or  power  must  affirmatively  appear,  either  expressly 
or  by  necessary  implication. 

"The  whole  doctrine  of  vested  rights  as  applied  to  the 
charters  of  corporations  is  based  upon  the  Dartmouth  College 
Case,  4  "Wheat.  518,  in  which  the  broad  proposition  was  laid 
down  that  such  charters  were  contracts  within  the  meaning 
of  the  constitution,  and  hence  that  an  act  of  the  state  legis- 
lature altering  a  charter  in  any  material  respect  was  uncon- 
stitutional and  void Subsequent  cases  have  settled  the 

law  that  wherever  property  rights  have  been  acquired  by 
virtue  of  a  corporate  charter,  such  rights,  so  far  as  they  are 
necessary  to  the  full  and  complete  enjoyment  of  the  main 
object  of  the  grant,  are  contracts  and  beyond  the  reach  of 
destructive  legislation.  Even  before  the  IDartmouth  College 
Case  was  decided  it  was  held  by  this  court  that  grants  of  land 
made  by  the  crown  to  colonial  churches  were  irrevocable,  and 
that  property  purchased  by  or  devised  to  them  prior  to  the 
adoption  of  the  constitution  could  not  be  diverted  to  other 
purposes  by  the  states  which  succeeded  to  the  sovereign  power 
of  the  colonies.  Terrett  v.  Taylor,  9  Cranch,  43 ;  Town  of 
Pawlet  V.  Clark,  9  Cranch,  292 ;  Society  for  Propagation  of 
the  Gospel  v.  New  Haven,  8  Wheat.  464. 

§  36.  "Indeed,  the  sanctity  of  charters  vesting  in  grantees 
the  title  to  lands  or  other  property  has  been  vindicated  in  a 
large  number  of  cases.  Davis  v.  Gray,  16  Wall.  203 ;  Fletcher 
V.  Peck,  6  Cranch,  87,  137;  Moore  v.  Robbins,  96  U.  S.  530; 
United  States  v.  Schurz,  102  U.  S.  378 ;  Noble  v.  Union  River 
Logging  R.  R.,  147  U.  S.  165.  This  court  has  had,  perhaps, 
more  frequent  occasion  to  assert  the  inviolability  of  corporate 
charters  in  cases  respecting  the  power  of  taxation  than  in 
any  other,  and  in  a  long  series  of  decisions  has  held  that  a 


§  37  SUMMARY   OF    CORPORATION    LAW.  38 

clause  imposing  certain  taxes  in  lieu  of  all  other  taxes  or  of 
all  taxes  to  which  the  company  or  stockholders  therein  would 
be  subject  is  impaired  by  legislation  raising  the  rate  of  tax- 
ation or  imposing  taxes  other  than  those  specified  in  the 
charter.  Thus,  in  State  Bank  of  Ohio  v.  Knoop,  16  How.  369, 
it  was  held  that  where  by  a  general  banking  law  it  was  pro- 
vided that  a  certain  percentage  of  dividends  should  be  set  off 
for  the  use  of  the  state  and  should  be  in  lieu  of  all  taxes  to 
which  the  company  or  stockholders  therein  would  otherwise 
be  subjected,  this  was  a  contract  fixing  permanently  the 
amount  of  taxation,  and  that  legislation  could  not  thereafter 
increase  it.  In  this  connection  it  was  said  by  Mr.  Justice 
IMcLean:  'Every  valuable  privilege  given  by  the  charter  and 
which  conduced  to  an  acceptance  of  it  and  an  organization 
under  it  is  a  contract  which  cannot  be  changed  by  the  legis- 
lature where  the  power  to  do  so  is  not  reserved  in  the  charter. 
The  rate  of  discount,  the  duration  of  the  charter,  the  specific 
tax  agreed  to  be  paid,  and  other  provisions  essentially  con- 
nected with  the  franchise  and  necessary  to  the  business  of 
the  bank  cannot,  without  its  consent,  become  a  subject  for 
legislative  action.'  To  the  same  effect  are  New  Jersey  v. 
Wilson,  7  Cranch,  164 ;  Gordon  v.  Appeal  Tax  Court,  3  How. 
133;  Dodge  v.  Woolsey,  18  How.  331;  Jefferson  Branch  Bank 
V.  Skelly,  1  Black,  436 ;  McGee  v.  Mathis,  4  Wall.  143 ;  Home 
of  the  Friendless  v.  Rouse,  8  Wall.  430 ;  Wilmington  R.  R.  v. 
Reid,  13  Wall.  264 ;  Humphrey  v.  Pegues,  16  Wall.  244 ;  Far- 
rington  v.  Tennessee,  95  U.  S.  679 ;  New  Jersey  v.  Yard,  95 
U.  S.  104 ;  Asylum  v.  New  Orleans,  105  U.  S.  362.  If,  how- 
ever, the  charter  contain  a  reservation  of  an  unlimited  power 
to  alter,  amend  or  repeal,  the  legislature  may  take  away 
an  immunity  from  taxation.  Tomlinson  v.  Jessup,  15  Wall. 
454.  Within  the  same  principle  are  grants  of  an  exclusive 
right  to  supply  gas  or  water  to  a  municipality  or  to  occupy 
its  streets  for  railway  purposes.  New  Orleans  Gas  Co.  v. 
Louisiana  Light  Co.,  115  U.  S.  650;  New  Orleans  Water 
Works  V.  Rivers,  115  U.  S.  674;  Louisville  Gas  Co.  v.  Citizens' 
Gas  Co.,  115  U.  S.  683 ;  St.  Tammany  Water  Works  v.  New 
Orleans  Water  Works,  120  U.  S.  64;  Boston  &  LoweU  R.  R. 
V.  Salem  &  Lowell  R.  R.,  2  Gray,  1. 

§  37.  "So  if  a  company  be  chartered  with  power  to  con- 
struct and  maintain  a  turnpike,  erect  toll-gates  and  collect  tolls, 
such  franchise  is  protected  by  the  constitution.  Turnpike  Co. 
V.  Illinois,  96  U.  S.  63 ;  Monongahela  Navigation  Co.  v.  United 
States,  148  U.  S.  312.  If  it  be  provided  in  the  charter  of 
a  bank  that  the  bills  and  notes  of  the  institution  shall  be  re- 


39  CHARTER   POWERS.  §  38 

ceived  in  payment  of  taxes  or  of  debts  due  to  the  state,  such 
undertaking  on  the  part  of  the  state  constitutes  a  contract  be- 
tween the  state  and  holders  of  the  notes  which  the  state  is 
not  at  liberty  to  break,  although  notes  issued  after  the  repeal 
of  the  act  are  not  within  the  contract  and  may  be  refused. 
Woodruff  V.  Trapnall,  10  How.  190;  Paup  v.  Drew,  10  How. 
218 ;  Furman  v.  Nichol,  8  Wall.  44 ;  Keith  v.  Clark,  97  U.  S. 
454 ;  Antoni  v.  Greenhow,  107  U.  S.  769 ;  Poindexter  v.  Groen- 
bow,  114  U.  S.  270.  And  in  Planters'  Bank  v.  Sharp,  6  How. 
301,  where  a  bank  was  chartered  with  the  usual  powers  to  re- 
ceive money  on  deposit,  discount  bills  of  exchange  and  notes, 
and  to  make  loans,  and  in  the  course  of  its  busine.ss  the  bank 
discounted  and  held  promissory  notes,  and  the  legislature  then 
pa.ssed  a  law  declaring  that  it  should  not  be  lawful  for  any 
bank  to  transfer  by  indorsement  or  otherwise  any  note,  bill 
receivable,  or  other  evidence  of  debt,  it  was  held  that  the 
statute  conflicted  with  the  constitution,  and  was  void.  It  was 
said  in  this  case  that  'a  power  to  dispose  of  its  notes  as  well 
as  other  property  may  well  be  regarded  as  an  incident  to  its 
business  as  a  bank  to  discount  notes  which  are  required  to  be 
in  their  terms  assignable  as  well  as  an  incident  to  its  right 
of  holding  them  and  other  property,  when  no  express  limi- 
tation is  imposed  upon  the  power  to  transfer  them.'  In 
each  of  the  above  cases,  however,  the  title  to  property  had 
either  become  vested  in  the  grantee  by  operation  of  law  or 
the  exercise  of  the  power  granted  was  so  far  necessary  to  the 
full  enjoyment  of  the  main  object  of  the  charter  that  persons 
subscribing  to  the  stock  might  be  presumed  to  take  into  con- 
sideration and  be  influenced  in  their  subscriptions  by  the 
fact  that  the  corporation  was  endowed  with  those  privileges 
during  the  continuance  of  the  charter. 

§  38.  **Such  limitations,  however,  upon  the  power  of  the 
legislature  must  be  construed  in  subservience  to  the  general 
rule  that  grants  by  the  state  are  to  be  construed  strictly  against 
the  grantees,  and  that  nothing  will  be  presumed  to  pass  except 
it  be  expressed  in  clear  and  unambiguous  language.  As  was 
said  by  Mr.  Justice  Swayne  in  Fertilizing  Co.  v.  Hyde  Park, 
97  U.  S.  659,  666:  'The  rule  of  construction  in  this  class  of 
cases  is  that  it  shall  be  most  strongly  against  the  corporation. 
Every  reasonable  doubt  is  to  be  resolved  adversely.  Nothing 
is  to  be  taken  as  conceded  but  what  is  given  in  unmistakable 
terms,  or  by  an  implication  equally  clear.  The  affirmative 
must  be  shown.  Silence  is  negation  and  doubt  is  fatal  to  the 
claim.  This  doctrine  is  vital  to  the  public  welfare.  It  is 
axiomatic   in   the   jurisprudence    of   this   court.'     Hence   an 


§  39  SUMMARY   OF    CORPORATION   LAW.  40 

exclusive  right  to  enjoy  a  certain  franchise  is  never  pre- 
sumed, and  unless  the  charter  contain  words  of  exclusion,  it  is 
no  impairment  of  the  grant  to  permit  another  to  do  the  same 
thing,  although  the  value  of  the  franchise  to  the  first  grantee 
may  be  wholly  destroyed.  This  principle  Avas  laid  down  at 
an  early  date  in  the  case  of  the  Charles  River  Bridge  v. 
Warren  Bridge,  11  Pet.  420,  and  has  been  steadily  adhered 
to  ever  since.  Turnpike  Co.  v.  State,  3  Wall.  210;  Providence 
Bank  v.  Billings,  4  Pet.  514;  Pennsylvania  R.  R.  v.  Miller, 
132  U.  S.  75.  If,  however,  there  be  an  exclusive  provision, 
as,  for  instance,  in  the  charter  of  a  bridge  company  that  it 
shall  not  be  lawful  for  any  person  to  erect  another  bridge 
within  a  certain  distance  of  the  bridge  authorized,  this  con- 
stitutes an  inviolable  contract.  The  Binghampton  Bridge,  3 
Wall.  51.  But  even  in  such  cases  if  the  second  charter  be 
for  a  similar  franchise,  but  to  be  exercised  in  a  substantially 
different  manner,  the  exclusive  right  conferred  by  the  first 
charter  is  held  not  to  be  violated ;  as,  for  instance,  if  the  first 
charter  be  for  an  ordinary  bridge  and  the  second  for  a  rail- 
way viaduct  impossible  for  man  or  beast  to  cross  except  in 
railway  cars.  Bridge  Proprietors  v.  Hoboken  Co.,  1  Wall. 
116.  So  if  the  first  franchise  be  for  the  sole  privilege  of 
supplying  a  city  with  water  from  a  designated  source,  it  is 
not  impaired  by  a  grant  to  another  party  of  the  privilege  to 
supply  it  with  water  from  a  different  source.  Stein  v.  Bien- 
ville Water  Supply  Co.,  141  U.  S.  67. 

"Upon  a  similar  principle  it  was  held  in  Tucker  v.  Fergu- 
son, 22  Wall.  527,  that  a  tax  upon  lands  owned  by  a  railway 
company  and  not  used,  nor  necessary,  in  working  the  road 
and  in  the  exercise  of  its  franchise,  was  not  unlawful,  though 
the  charter  had  provided  for  a  certain  tax  upon  the  railroad 
company,  and  had  enacted  that  such  tax  should  be  in  lieu 
of  all  other  taxes  to  be  imposed  within  the  state.  See,  also, 
West  Wisconsin  Ry.  v.  Supervisors,  93  U.  S.  595. 

§  39.  "Nor  does  it  follow  from  the  fact  that  the  contract 
evidenced  by  the  charter  cannot  be  impaired  that  the  power  of 
the  legislature  over  such  charter  is  wholly  taken  away,  since 
statutes  which  operate  only  to  regulate  the  manner  in  which 
the  franchises  are  to  be  exercised  and  which  do  not  interfere 
substantially  with  the  enjoyment  of  the  main  object  of  the 
grant  are  not  open  to  the  objection  of  impairing  the  contract. 
A  familiar  instance  of  this  class  of  legislation  is  that  enacted 
under  what  is  known  as  the  police  power.  In  virtue  of  this 
the  state  may  prescribe  regulations  contributing  to  the  com- 
fort, safety  and  health  of  passengers,  the  protection  of  the 


41  CHARTER   POWERS.  §  40 

public  at  highway  crossings  or  elsewhere,  the  security  of 
owners  of  adjacent  property,  by  requiring  the  track  to  be 
fenced,  and  such  appliances  to  be  annexed  to  the  engines  as 
shall  prevent  the  communication  of  fire  to  neighboring  build- 
ings. Cooley  Prin.  Const.  Law,  321.  This  power,  as  was 
said  by  Mr.  Justice  Miller  in  the  Slaughter-house  Cases,  16 
Wall.  36,  62,  is  and  must  be,  from  its  very  nature,  incapable 
of  any  very  exact  definition  or  limitation.  'Upon  it  depends 
the  security  of  social  order,  the  life  and  health  of  the  citizen, 
the  comfort  of  existence  in  a  thickly  populated  community, 
the  enjoyment  of  private  and  social  life,  and  the  beneficial 
use  of  property.'  The  following  cases  show  to  what  extent 
and  for  what  purposes  this  power  may  be  exercised.  Slaugh- 
ter-house Cases,  16  AVall.  36 ;  Fertilizing  Co.  v.  Hyde  Park,  97 
U.  S.  659 ;  Beer  Co.  v.  Massachusetts,  97  U.  S.  25 ;  Patterson 
v.  Kentucky,  97  U.  S.  501 ;  Barbier  v.  Conolly,  113  U.  S.  27 ; 
Charlotte  Columbia  etc.  R.  R.  v.  Gibbes,  142  U.  S.  386 ;  Lawton 
V.  Steele,  152  U.  S.  133;  Eagle  Ins.  Co.  v.  Ohio,  153  U.  S. 
446.  And  so  important  is  this  power  and  so  necessary  to  the 
public  safety  and  health,  that  it  cannot  be  bargained  away  by 
the  legislature,  and  hence  it  has  been  held  that  charters  for 
purposes  inconsistent  with  a  due  regard  for  the  public  health 
or  public  morals  may  be  abrogated  in  the  interests  of  a  more 
enlightened  public  opinion.  Stone  v.  Mississippi,  101  U.  S. 
814;  Phalen  v.  Virginia,  8  How.  163,  168. 

''In  obedience  to  the  same  principle  it  has  always  been  held 
that  the  legislature  may  repeal  laws  authorizing  municipal 
subscription  to  railways,  though  such  laws  were  in  existence 
at  the  time  the  railway  was  chartered  and  may  be  supposed 
to  have  influenced  the  promoters  and  stockholders  of  the  road 

in  undertaking  its  construction The  contract  protected 

by  this  clause  must  also  be  founded  upon  a  good  considera- 
tion. If  it  be  a  mere  nude  pact,  a  bare  promise  to  allow  a 
certain  thing  to  be  done,  it  will  be  construed  as  a  revocable 
license. 

§  40.  "A  vested  right  is  defined  by  Fearne  in  his  work  upon 
Contingent  Remainders  as  'an  immediate  fixed  right  of  pres- 
ent or  future  enjoyment';  and  by  Chancellor  Kent  as  'an 
immediate  right  of  present  enjoyment  or  a  present  fixed 
right  of  future  enjoyment.'  4  Kent  Com.  202.  It  is  said 
by  Mr.  Justice  Cooley  that  'rights  are  vested  in  contradis- 
tinction to  being  expectant  or  contingent.  They  are  vested 
when  the  right  to  enjoyment,  present  or  prospective,  has  be- 
come the  property  of  some  particular  person  or  persons  as  a 
present  intercut.  They  are  expectant  when  they  depend  upon 
the  continued  existence  of  the  present  condition  of  things 


§  41  SUMMARY   OF    CORPORATION   LAW.  42 

until  the  happening  of  some  future  event.  They  are  con- 
tingent when  they  are  only  to  come  into  existence  on  an  event 
or  condition  which  may  not  happen  or  be  performed  until 
some  other  event  may  prevent  their  vesting.'  Principles  of 
Const.  Law,  332. 

"As  applied  to  railroad  corporations,  it  may  reasonably 
be  contended  that  the  term  extends  to  all  rights  of  property 
acquired  by  executed  contracts,  as  well  as  to  all  such  rights 
as  are  necessary  to  the  full  and  complete  enjoyment  of  the 
original  grant  or  of  property  legally  acquired  subsequent  to 
such  grant.  If,  for  example,  the  legislature  should  authorize 
the  construction  of  a  certain  railroad,  and  by  a  subsequent 
act  should  take  away  the  power  to  raise  funds  for  the  con- 
struction of  the  road  in  the  usual  manner  by  a  mortgage  or 
the  power  to  purchase  rolling  stock  or  equipment,  such  acts 
might  perhaps  be  treated  as  so  far  destructive  of  the  original 
grant  as  to  render  it  valueless,  although  there  might  in  neither 
case  be  an  express  repeal  of  any  of  its  provisions.  Sala  v. 
New  Orleans,  2  Woods,  188. 

"But  where  the  charter  authorizes  the  company  in  sweep- 
ing terms  to  do  certain  things  which  are  unnecessary  to  the 
main  object  of  the  grant,  and  not  directly  and  immediately 
within  the  contemplation  of  the  parties  thereto,  the  power  so 
conferred,  so  long  as  it  is  unexecuted,  is  within  the  control 
of  the  legislature  and  may  be  treated  as  a  license,  and  may 
be  revoked  if  a  possible  exercise  of  such  power  is  found  to 
conflict  with  the  interests  of  the  public."  (Brown,  J.,  in 
Pearsall  v.  Great  Northern  Ry.,  161  U.  S.  646.) 

§  41.  In  construing  a  provision  in  a  charter  of  a  railroad  to 
unite  with  other  roads,  Bro^vn,  J.,  in  Louisville  &  Nashville 
R.  R.  Co.  V.  Kentucky,  161  U.  S.  677,  said : 

"In  construing  this  section  w^e  are  bound  to  bear  in  mind 
the  general  rule  so  often  affirmed  by  this  court,  that  all  doubts 
with  regard  to  the  authority  granted  in  a  corporate  charter 
are  to  be  resolved  against  the  corporation,  and  that  a  sur- 
render of  the  power  of  the  legislature  in  any  matter  of  public 
concern  must  never  be  presumed  from  uncertain  or  equivocal 
expressions.  Dubuque  &  Pacific  R.  R.  v.  Litchfield,  23  How. 
66,  88 ;  Delaware  Railroad  Tax,  18  Wall.  206,  225 ;  Bailey  v. 
Maguire,  22  Wall.  215;  Slidell  v.  Grandjean,  111  U.  S. 
412;  Belmont  Bridge  v.  Wheeling  Bridge,  138  U.  S.  287." 

Respecting  the  reservation  of  the  right  to  amend,  alter  or 
repeal  the  charter.  Field,  J.,  in  Tomlinson  v.  Jessup,  15  Wall. 
454,  said: 


43  CHARTER   POWERS.  §  42 

"The  reservation  affects  the  entire  relation  between  the 
state  and  the  corporation,  and  places  under  leuislative  con- 
trol all  rights,  privileges  and  immunities  derived  by  its  char- 
ter directly  from  the  state." 

§  42.  While  charters  are  construed  strictly  as  above  set 
forth,  nevertheless  rights  and  powers  necessary  to  the  exercise 
of  those  expressl}^  given  are  implied. 

"Anciently,  it  seems  to  have  been  held  that  corporations 
could  not  do  anything  without  deed.  13  Hen.  VIII,  12 ;  4 
Hen.  VII,  6;  7  Ibid.  9.  Afterward,  the  rule  seems  to  have 
been  relaxed,  and  they  were,  for  convenience  sake,  permitted 
to  act  in  ordinary  matters  without  deed ;  as  to  retain  a  ser- 
vant, cook,  or  butler  (Plowd.  91b;  2  Saund.  305)  ;  and  grad- 
ually this  relaxation  widened  to  embrace  other  objects. 
Bro.  Corp.  51;  3  Salk.  191;  3  Lev.  107;  Moore,  512.  At 
length,  it  seems  to  have  been  established  that  though  they 
could  not  contract  directly,  except  under  their  corporate  seal, 
yet  they  might,  by  mere  vote  or  other  corporate  act,  not  under 
their  corporate  seal,  appoint  an  agent,  whose  acts  and  con- 
tracts within  the  scope  of  his  authority  would  be  binding  on 
the  corporation.  Rex  v.  Bigg,  3  P.  Wms.  419.  And  courts 
of  equity  in  this  respect,  seeming  to  follow  the  Inw,  have 
decreed  a  specific  performance  of  an  agreement  made  by  a 
major  part  of  a  corporation  and  entered  in  the  corporation 
books,  although  not  under  the  corporate  seal.  1  Fonbl.  305 
(Phila.  ed.),  note  o.  The  sole  ground  upon  which  such 
an  agreement  can  be  enforced  must  be  the  capacity  of  the 
corporation  to  make  an  unsealed  contract 

"The  technical  doctrine  that  a  corporation  could  not  con- 
tract except  under  its  seal,  or,  in  other  words,  could  not  make 
a  promise,  if  it  ever  had  been  fully  settled,  must  have  been 
productive  of  great  mischiefs.  Indeed,  as  soon  as  the  doctrine 
was  established  that  its  regularly  appointed  agent  could  con- 
tract in  their  name  without  seal,  it  was  impossible  to  support 
it,  for  otherwise  the  party  who  trusted  such  contract  would 
be  without  remedy  against  the  corporation.  Accordingly,  it 
would  seem  to  be  a  sound  rule  of  law  that  wherever  a  corpora- 
tion is  acting  within  the  scope  of  the  legitimate  purposes  of 
its  institution,  all  parol  contracts  made  by  its  authorized 
agents  are  express  promises  of  the  corporation ;  and  all  duties 
imposed  on  them  by  law  and  all  benefits  conferred  at  their 
request  raise  implied  promises  for  the  enforcement  of  which 
an  action  may  well  lie.  And  it  seems  to  the  court  that  ad- 
judged cases  fully  support  the  position.     Bank  of  England 


§  43  SUMMARY    OF   CORPORATION    LAW.  44 

V.  Moffat,  3  Bro.  C.  C.  262 ;  Rex  v.  Bank  of  England,  2  Doug. 
524,  and  note;  Gray  v.  Portland  Bank,  3  Mass.  364;  Worcester 
Turnpike   Corp.   v.   Willard,   5   Ibid.   80;   Gilmore  v.   Pope, 

5  Mass.  491;  Andover  &  Medford  Turnpike  Corp.  v.  Gould, 

6  Mass.  40. 

§  43.  "In  the  case  before  the  court  these  principles  assume 
a  peculiar  importance.  The  act  incorporating  the  Bank  of 
Columbia  (act  of  Maryland,  1793,  c.  30)  contains  no  express 
provision  authorizing  the  corporation  to  make  contracts.  And 
it  follows  that  upon  principles  of  the  common  law,  it  might 
contract  under  its  corporate  seal.  No  power  is  directly  given 
to  issue  notes  not  under  seal.  The  corporation  is  made 
capable  to  have,  purchase,  receive,  enjoy  and  retain  lands, 
tenements,  hereditaments,  goods,  chattels  and  effects  of  what 
kind,  nature  or  quality  soever,  and  the  same  to  sell,  grant, 
demise,  alien  or  dispose  of;  and  the  board  of  directors  are 
authorized  to  determine  the  manner  of  doing  business  and  the 
rules  and  forms  to  be  pursued ;  to  appoint  and  pay  the  various 
officers,  and  dispose  of  the  money  or  credit  of  the  bank  in 
the  common  course  of  banking  for  the  interest  and  benefit  of 
the  proprietors.  Unless,  therefore,  a  corporation,  not  ex- 
pressly authorized,  may  make  a  promise,  it  might  be  a  serious 
question  how  far  the  bank  notes  of  this  bank  were  legally  bind- 
ing upon  the  corporation,  and  how  far  a  depositor  in  the  bank 
could  possess  a  legal  remedy  for  his  property  confided  to  the 
good  faith  of  the  corporation.  In  respect  to  insurance  com- 
panies also,  it  would  be  a  difficult  question  to  decide  whether 
the  law  would  enable  a  party  to  recover  back  a  premium  the 
consideration  of  which  had  totally  failed.  Public  policy, 
therefore,  as  well  as  law,  in  the  judgment  of  the  court,  fully 
justifies  the  doctrine  which  w^e  have  endeavored  to  establish." 
(Story,  J.,  in  Bank  of  Columbia  v.  Patterson,  7  Cranch,  298.) 
■  "Now,  I  am  of  opinion  that  though  power  to  make  laws 
[by-laws]  is  given  by  special  clause  to  all  incorporations,  yet 
it  is  needless ;  for  I  hold  it  to  be  included  by  law  in  the  very 
act  of  incorporating  as  is  also  the  power  to  sue,  to  purchase 
and  the  like.  For  as  reason  is  given  to  the  natural  body  for 
the  governing  of  it,  so  the  body  corporate  must  have  laws, 
as  a  politic  reason  to  govern  it ;  but  those  laws  must  ever  be 
subject  to  the  general  law  of  the  realm  as  subordinate  to  it. 
And  therefore,  though  there  be  no  proviso  for  that  purpose, 
the  law  supplies  it."  (Hobart,  C.  J.  ( ?),  in  Norris  v.  Stops, 
1614r-1625  (?),  Hobart's  Reports,  p.  211a.), 


45  CHARTER   POWERS.  §  4-1 

§  44.  "The  remaining  consideration  relates  to  the  authority 
of  Sampson  to  execute  the  mortgage  in  behalf  of  the  corpora- 
tion. It  is  not  necessary  that  the  authority  should  be  given 
by  a  formal  vote.  Such  an  act  by  the  president  and  general 
manager  of  the  business  of  the  corporation,  with  the  knowl- 
edge and  concurrence  of  the  directors,  or  with  their  subse- 
quent and  long-continued  acquiescence,  may  properly  be  re- 
garded as  the  act  of  the  corporation.  Authority  in  the  agent 
of  a  corporation  may  be  inferred  from  the  conduct  of  its 
officers  or  from  their  knowledge  and  neglect  to  make  objec- 
tion, as  well  as  in  the  case  of  individuals."  (Wells,  J.,  in 
Sherman  v.  Fitch,  98  Mass.  59.) 

"To  corporations,  however  erected,  there  are  said  to  be 
certain  incidents  attached  without  any  express  words  or  au- 
thority for  this  purpose ;  such  as  the  power  to  plead  and  be 
impleaded,  to  purchase  and  alien,  to  make  a  common  seal 
and  to  pass  by-laws.  Com.  Dig.,  'Franchise,'  F.  10,  13." 
(Story,  J.,  in  Bank  v.  Dandridge,  12  Wheat.  63,  p.  66.) 

"The  charter  of  a  corporation,  read  in  connection  with 
the  general  laws  applicable  to  it,  is  the  measure  of  its  powers, 
and  a  contract  manifestly  beyond  those  powers  will  not  sus- 
tain an  action  against  the  corporation.  But  whatever,  under 
the  charter  and  other  general  laws,  reasonably  construed,  may 
fairly  be  regarded  as  incidental  to  the  objects  for  which  the 
corporation  is  created,  is  not  to  be  taken  as  prohibited. 
Thomas  v.  Railroad  Co.,  101  U.  S.  71 ;  Attorney  General  v. 
Great  Eastern  Ry.  Co.,  5  App.  Cas.  473 ;  Davis  v.  Old  Colony 
R.  R.  Co.,  131  Mass.  258."  (Gray,  J.,  in  Green  Bay  etc.  R. 
R.  Co.  V.  Union  etc.  Co.,  107  U.  S.  98.) 

"Conceding  the  rule  applicable  to  all  statutes  that  what  is 
fairly  implied  is  as  much  granted  as  what  is  expressed,  it 
remains  that  the  charter  of  a  corporation  is  the  measure  of 
its  powers,  and  that  the  enumeration  of  these  powers  implies 
the  exclusion  of  all  others."  (Miller,  J.,  in  Thomas  v.  Rail- 
road Co.,  101  U.  S.  71,  p.  82.) 

"It  is  a  well-settled  rule  of  construction  of  grants  by  the 
legislature  to  corporations,  whether  public  or  private,  that 
only  such  powers  and  rights  can  be  exercised  under  them  as 
are  clearly  comprehended  within  the  words  of  the  act  or  de- 
rived therefrom  by  necessary  implication,  regard  being  had 
to  the  objects  of  the  grant.  Any  ambiguity  or  doubt  arising 
out  of  the  terms  used  by  the  legislature  must  be  resolved  in 
favor  of  the  public."  (Nelson,  J.,  in  Minturn  v,  Larue  et. 
al.,  23  How.  435,  p.  436.) 


§  45  SUMMARY   OF   CORPORATION   LAW.  46 

§  45.  In  Perrine  v.  Chesapeake  &  Delaware  Canal  Co.,  9 
How.  171,  in  holding  that  the  canal  company  had  no  right  to 
demand  tolls  except  as  specified  and  enumerated  in  the  charter 
of  the  company,  Taney,  C.  J.,  said: 

"No  toll  is  given  on  the  vessels  themselves,  except  only 
when  they  have  no  commodities  on  board,  or  not  sufficient  to 
yield  a  toll  of  four  dollars.  Passengers  are  not  mentioned  in 
the  enumeration,  nor  is  any  toll  given  upon  a  vessel  on  account 
of  the  persons  or  passengers  it  may  have  on  board. 

"Now,  it  is  the  well-settled  doctrine  of  this  court  that  a 
corporation  created  by  statute  is  a  mere  creature  of  the  law, 
and  can  exercise  no  powers  except  those  which  the  law  confers 
upon  it,  or  which  are  incident  to  its  existence.  (Head  and 
Armory  v.  The  Providence  Ins.  Co.,  2  Cranch,  127 ;  Dartmouth 
College  V.  Woodward,  4  Wheat.  636;  Bank  of  the  United 
States  V.  Dandridge,  12  Wheat.  64;  Charles  River  Bridge  v. 
Warren  Bridge,  11  Pet.  544;  Bank  of  Augusta  v.  Earle,  13 
Pet.  587.)  And  as  no  power  is  given  to  this  corporation  to 
demand  toll  from  passengers,  or  from  vessels  on  account  of 
the  passengers  on  board,  it  is  very  clear  that  no  such  power 
can  be  exercised,  and  no  such  toll  lawfully  taken. 

"The  principle  above  stated  is  also  an  answer  to  the  argu- 
ment which  places  the  right  of  the  company  to  demand  toll 
upon  the  ground  that  it  is  the  absolute  owner  of  the  works  and 
of  the  land  it  occupies,  and  insists  that  it  may  therefore,  like 
any  other  owner,  demand  compensation  from  any  person  pass- 
ing over  its  property.  The  error  of  this  argument  consists 
in  regarding  the  title  of  the  company  to  the  property  in  ques- 
tion as  derived  to  them  upon  common-law  principles,  and 
measuring  their  rights  by  the  rules  of  the  common  law.  The 
corporation  has  no  rights  of  property  except  those  derived 
from  the  provisions  of  the  charter,  nor  can  it  exercise  any 
powers  over  the  property  it  holds  except  those  with  which  the 
charter  has  clothed  it.  It  holds  the  property  only  for  the 
purposes  for  which  it  was  permitted  to  acquire  it — that  is,  to 
effectuate  the  objects  for  which  the  legislature  created  it. 
And  whether  it  may  lawfully  demand  compensation  from  a 
person  whom  it  permits  to  pass  over  its  property  must  depend 
upon  the  language  of  the  charter,  and  not  upon  the  rules  of 
the  common  law. 

"Certainly  in  this  instance  the  power  is  not  conferred  in 
express  terms,  nor  are  any  words  used  from  which  it  can 
reasonably  be  implied.  It  would,  indeed,  be  a  most  unusual 
one,  and  we  believe  without  precedent  in  any  charter  here- 


47  CHARTER   POWERS.  §  46 

tofore  granted  by  any  state  in  this  Union.  For  the  power 
claimed  is  the  right  to  demand  toll  from  every  citizen  who 
passes  through  the  canal,  and  to  fix  the  amount  at  the 
discretion  of  the  corporation.  In  form,  it  is  true,  the  demand 
is  made  on  the  owner  of  the  vessel  engaged  in  transporting 
passengers ;  but  it  is  immaterial  to  the  passenger  whether  he 
is  charged  with  the  toll  in  the  increased  price  of  his  passage 
or  by  a  direct  tax  upon  himself.  In  either  case  the  result  is 
the  same,  and  the  power  exercised  is  the  same.  Such  an  un- 
limited power  to  levy  contributions  on  the  public,  and  one  so 
inconsistent  with  the  ordinary  course  of  legislation  upon  that 
subject,  and,  we  may  add,  so  unjust  and  injurious  to  the  pub- 
lic, ought  not  to  be  sustained  in  a  court  of  justice,  unless  it 
is  conferred  in  plain  and  express  words.  It  should  not  be 
inferred  where  the  slightest  doubt  could  arise  and  the  words 
are  capable  of  any  other  construction ;  and  still  less  can  it  be 
inferred  in  a  charter  like  this,  where  the  toll  granted  upon 
goods  and  property  of  every  kind  is  so  carefully  specified  and 
fixed  in  the  law,  and  the  charter  altogether  silent  in  relation 
to  passengers.  The  contrary  inference  would  seem  to  be 
irresistible. ' ' 

§  46.  While  articles  of  association  filed  under  a  general  law 
are  commonly  termed  the  charter,  they  cannot  assume  any 
rights  or  powers  not  within  the  statute. 

"It  is  argued  that  the  articles  of  association  under  the 
Oregon  law,  and  the  memorandum  of  association,  under  the 
Companies'  Acts  of  Great  Britain,  are  themselves  the  equiva- 
lent of  an  act  of  incorporation  by  the  legislature,  and  that 
whatever  is  found  as  a  grant  of  power  or  description  of  the 
purpose  of  the  company,  set  forth  in  such  articles  or  mem- 
orandum, is  tantamount  to  a  legislative  act.  A  phrase  in  the 
opinion  of  the  court  in  Thomas  v.  Railroad  Co.,  supra,  is 
cited  as  supporting  this  proposition,  namely,  'The  memoran- 
dum of  association,  as  Lord  Cairns  said,  stands  in  the  place 
of  a  legislative  charter.'  But  what  was  meant  both  by  Lord 
Cairns  and  by  this  court,  was  that  anything  not  claimed, 
granted  or  described  in  such  instrument  in  relation  to  the 
powers  and  business  of  the  corporation  could  not  be  held  to 
be  a  part  of  them  by  construction ;  in  other  words,  that  its 
powers  could  not  exceed  those  enumerated  therein.  It  was 
necessarily  implied  in  such  a  remark  that  anything  in  such 
articles  or  memorandum  not  warranted  by  the  statutes  in 
question  authorizing  the  formation  of  corporate  bodies  was 
void  for  want  of  authority. 


§§47,  48  SUMMARY    OF    CORPORATION   LAW.  48 

"Of  course,  any  authority  for  the  exercise  of  corporate 
powers,  derived  from  the  laws  of  Oregon,  must  be  in  accord 
with  the  constitution  of  that  state  and  its  statutes  upon  that 
subject.  The  constitutional  provision,  above  quoted,  that  cor- 
porations shall  not  be  created  by  special  laws,  but  may  be 
formed  under  general  laws,  implies  that  no  private  corpora- 
tion could  be  created  thereafter  until  such  general  law  had 
been  enacted,  and  that  it  thereupon  became  the  fundamental 
law  of  the  state  in  regard  to  all  corporations  formed  under 
it.  It  is  idle  to  say,  therefore,  that  any  corporation  could 
assume  to  itself  powers  of  action  by  the  mere  declaration  in 
its  articles  or  memorandum  that  it  possessed  them."  (Miller, 
J.,  in  Oregon  Ry.  Co.  v.  Oregonian  Ey.  Co.,  130  U.  S.  1,- 
p.  25.) 


ACQUIRING  AND  HOLDING  OF  REAL  PROPERTY  BY 
CORPORATIONS. 

§  47.  The  right  or  power  of  a  corporation  to  acquire  and 
hold  land'  or  real  property  involves  several  questions : 

(1)  The  implied  power  incident  to  a  corporation  as  such; 

(2)  The  extent  of  statutory  authority,  prohibition  or  lim- 
itation; 

(3)  In  what  cases  the  individual  may  question  the  right. 
In  view  of  the  fact  that,  historically,  the  main  purpose  of 

a  corporation  has  ever  been  regarded  as  that  of  holding  prop- 
erty, that  object  being  the  original  cause  of  its  adoption  in 
England,  the  power  to  hold  real  property  has  always  been 
held  both  in  England  and  America  as  being  naturally  inci- 
dent to  a  corporation,  irrespective  of  express  grant,  and  sub- 
ject only  to  statutory  prohibition  or  limitation. 

§  48.  In  First  Parish  in  Sutton  v.  Cole,  3  Pick.  (Mass.) 
232,  in  holding  a  devise  to  a  parish  for  the  use  of  schools  valid, 
Parker,  C.  J.,  said: 

"By  the  common  law  it  was  the  right  of  corporations  to 
take  and  hold  property,  both  real  and  personal,  to  their  own 
use,  unless  restricted  by  the  terms  of  their  charter,  or  by 
immemorial  usage  in  such  corporations  as  exist  by  prescrip- 
tion. This  common-law  right  has  been  taken  aw^ay  in  Eng- 
land by  the  Statutes  of  Mortmain,  so  that  now  corporations 
can  take  and  hold  real  estate  only  by  license  from  the  King  or 


49  CHARTER  PO\^^ERS.  §  49 

by  act  of  Parliament,  if  they  derive  their  power  from  that 
source.  1  Bl.  Com.  475,  Christian's  note;  Co.  Lit.  2.  These 
Statutes  of  Mortmain  seem  never  to  have  been  re-enacted, 
adopted  or  practiced  upon  in  this  country,  but  still  it  may 
be  inferred  from  the  special  power  given  to  various  cor- 
porations by  acts  of  the  legislature  to  hold  real  estate  to  a 
certain  limited  extent,  that  corporations  created  for  specific 
objects  would  not  have  the  power  to  take  and  hold  real  estate 
for  purposes  wholly  foreign  to  those  objects." 

In  Nicoll  V.  The  New  York  &  Erie  R.  R.  Co.,  12  N.  Y.  121, 
in  holding  that  a  railroad  company  incorporated  for  a  limited 
time  could  take  a  fee  in  lands,  Parker,  J.,  said : 

"The  company  had  ample  power  to  purchase  lands.  It 
was  a  power  incident  at  common  law  to  all  corporations  unless 
they  were  especiallv  restrained  bv  their  charters  or  by  stat- 
ute. (2  Kent,  28l';  Co.  Litt.  44a,  300b;  1  Kyd's  Corp.,  76, 
78,  108,  115;  3  Pick.  239.)" 

To  the  same  effect  are:  The  Banks  v.  Poitiaux,  3  Rand. 
(Va.)  136;  Widow  etc.  of  Reynolds  v.  Conners-Stark  Co., 
5  Ohio,  204;  Lathrop  v.  Commercial  Bank,  8  Dana  (Ky.), 
114;  Thompson  v.  Waters,  25  Mich.  214;  Mallet  v.  Simpson, 
94  N.  C.  37;  People  v.  La  Rue,  67  Cal.  526;  Kelly  v.  People's 
Trans.  Co.,  3  Or.  189. 

§  49.  Corporations  having,  therefore,  as  a  natural  incident 
the  power  to  acquire  and  hold  real  estate,  the  extent  of  their 
power  becomes  a  question  of  statutory  restriction,  express  or 
implied. 

In  England,  the  acquisition  and  holding  of  lands  by  cor- 
porations is  subjected  to  the  stringent  restrictions  of  the 
Acts  of  Mortmain,  but  these  statutes  have  not  been  re-enacted 
in  this  country,  except  in  Pennsylvania  and  in  New  York,  to 
the  extent  of  the  prohibition  contained  in  the  Statute  of  Wills. 

Statutory  authority  to  acquire  and  hold  land  is  now  given 
by  the  corporation  laws  of  the  states. 

Statutory  restrictions  of  the  power  of  corporations  to  ac- 
quire and  hold  land  are  of  three  classes:  (1)  Express  pro- 
hibitions as  contained  in  the  Mortmain  Acts  (In  re  McGraw, 
111  N.  Y.  66)  ;  (2)  Express  statutory  limitations  where  au- 
thority is  given  by  statute  to  a  corporation  or  class  of  cor- 
4 


§  50  SUMMARY   OF   CORPORATION   LAW.  50 

porations  to  acquire  and  hold  land  to  an  amount  specified 
(Hubbard  v.  Worcester  Art  Museum  (Mass.),  80  N.  E.  490)  ; 
(3)  Implied  statutory  limitations  confining  the  acquisition  and 
holding  of  lands  by  corporations  to  those  required  for  the  cor- 
porate purposes  specified  in  the  charter  and  to  the  extent  rea- 
sonably necessary  for  those  purposes.  (Sutton  v.  Cole,  3 
Pick.  (Mass.)  232;  Riley  v.  Rochester,  9  N.  Y.  64;  National 
Home  Bldg.  etc.  Assn.  v.  Home  Sav.  Bank,  181  111.  35  (citing 
authorities);  Thweatt  v.  Bank  of  Ilopkinsville,  81  Ky.  1; 
Pacific  R.  R.  Co.  v.  Seely,  45  Mo.  212 ;  State  v.  Newark,  25 
N.  J.  L.  315;  Case  v.  Kelly,  133  U.  S.  1;  Waldo  v.  Chicago 
etc.  R.  Co.,  14  Wis.  625;  Cecum  v.  Sprague  Mfg.  Co.,  34 
Conn.  529;  First  M.  E.  Church  v.  Dixon,  178  111.  260;  People 
V.  Pullman  Palace  Car  Co.,  175  111.  125.) 

§  50.  The  question  whether  the  individual  may  question 
the  right  or  power  of  the  corporation  to  acquire  and  hold  land 
has  given  rise  to  much  diversity  in  the  decisions.  Where  courts 
have  construed  the  corporation  to  be  utterly  without  power 
to  take  or  hold  land,  such  attempted  taking  has  been  held 
void,  and  subject  to  question  by  any  individual  interested. 
Thus,  in  New  York,  the  statute  prohibits  a  corporation  from 
taking  by  devise,  except  to  the  extent  authorized  by  its  char- 
ter, and  it  is  held  that  a  devise  to  a  corporation  in  excess  of 
its  limit  authorized  by  statute  is  void,  and  may  be  questioned 
by  the  individual  interested.  (In  re  McGraw,  111  N.  Y.  66.) 
In  that  case,  in  holding  that  the  heirs  and  next  of  kin  of  the 
testator  could  defeat  a  gift  to  Cornell  University  in  excess  of 
the  amount  authorized  by  charter,  Peckham,  J.,  said: 

"A  devise  to  a  corporation  which  is  forbidden  to  take  (or 
forbidden  to  hold,  if  the  word,  under  the  circumstances  of 
the  case,  is  construed  to  include  a  taking  also)  does  not,  there- 
fore, give  a  title  subject  to  the  right  of  some  superior  to 
claim  a  forfeiture  of  the  land;  but  if  it  be  in  violation  of  a 
statute,  I  think  the  devise  is  void,  and  the  land  descends  to 
the  heir  or  residuary  devisee." 

Similarly  in  Davidson  College  v.  Chambers,  56  N.  C.  253; 
Wood  V.  Hammond,  16  R.  I.  98 ;  House  of  Mercy  v.  Davidson, 


51  CHARTER   POWERS.  §§  51,  52 

90  Tex.  529;   Cromil  v.  Louisville  Orphans'  Home  Soc,  3 
Bush  (Ky.),  365;  Heiskell  v.  Lodge,  87  Tenn.  668. 

§  51.  And  in  many  jurisdictions  where  a  corporation  has 
attempted  to  acquire  land  for  a  purpose  not  authorized  by  its 
charter,  it  has  been  held  a  nullity  and  void,  and  that  an 
individual  interested  and  not  for  some  reason  estopped  could 
raise  the  question  and  defeat  such  acquisition  and  holding. 
(Occum  Co.  v.  Sprague  Mfg.  Co.,  34  Conn.  529;  National 
Home  etc.  Assn.  v.  Home  Sav.  Bank,  181  111.  35;  Rivanna 
Nav.  Co.  V.  Dawsons,  3  Gratt.  (Va.)  19;  Thweatt  v.  Bank 
of  Hopkinsville,  81  Ky.  1.) 

§  52.  Where,  however,  there  is  no  prohibition,  the  distinc- 
tions are  pointed  out  by  the  supreme  court  of  Massachusetts  in 
the  case  of  Hubbard  v.  Worcester  Art  Museum,  80  N.  E.  490, 
where  it  was  held  that  a  devise  to  a  corporation  in  excess  of 
the  amount  authorized  by  the  charter  was  not  for  that  reason 
necessarily  void.  Knowlton,  C.  J.,  in  delivering  the  opinion 
of  the  court,  said: 

"Under  the  feudal  system,  when  land  was  given  to  a  cor- 
poration, the  chief  lords  of  whom  the  land  was  held  and  the 
King,  as  ultimate  chief  lord,  lost  their  chances  of  escheat 
and  various  other  rights  and  incidents  of  military  tenure. 
During  the  Middle  Ages  the  accumulation  of  land  in  the 
ecclesiastical  corporations  was  so  great  'as  to  be  thought  a 
national  grievance.  Hence  the  English  Mortmain  Acts, 
which  go  back  to  Magna  Charta  and  Stat.  9,  Henry  III, 
chapter  36,  and  which  have  continued,  with  various  modi- 
fications, to  this  day.  (See  Stat.  7,  Edward  I,  c.  2;  Stat. 
15,  Richard  II,  c.  5 ;  Shelf ord  Mortmain,  2,  6,  8,  16,  25,  34, 
39,  809,  812;  Tyssen  on  Charitable  Bequests,  2,  383.)  Under 
these  acts  the  alienations  were  not  void,  so  as  to  let  in  the 
grantors  and  their  heirs;  but  they  merely  operated  as  a  for- 
feiture which  gave  a  right  to  the  mesne  lord  and  the  King 
to  enter  after  due  inquest.  This  right  to  enter  was  often 
waived  by  a  license  in  Mortmain.  (See  citations  above  and 
Tyssen  on  Charitable  Bequests,  383;  Stat.  7  &  8,  William  III, 
c.  37.)  In  form,  these  licenses  commonly  authorized  a  hold- 
ing of  property  'not  exceeding'  a  certain  value.  In  later 
years  this  authority  sometimes  has  been  inserted  in  the  char- 
ter, and  this  limited  power  of  purchase  has,  it  is  said,  been 


§  53  SUMMARY    OF    CORPORATION   LAW.  52 

exceeded  by  almost  all  corporations.  ( Shelf ord  Mortmain, 
55.  See,  also,  pages  10,  44,  49,  56,  891 ;  Tyssen  on  Charitable 
Bequests,  393,  394,  396.) 

"Another  act,  Stat.  9,  George  II,  chapter  36,  which  is 
usually  called  the  'Mortmain  Act'  but  is  called  by  Tyssen  the 
'Georgian  Mortmain  Act,'  is  of  a  very  different  nature.  One 
of  its  purposes,  as  declared  in  the  preamble,  is  to  avoid 
'improvident  alienations  or  dispositions  made  by  languishing 
or  dying  persons  or  by  other  persons  to  uses  called  '  charitable 
uses;  to  take  place  after  their  deaths,  to  the  disherison  of 
their  lawful  heirs.'  Considered  in  reference  to  its  purposes, 
it  is  not  properly  called  a  ]\Iortmain  Act.  It  applies  only  to 
gifts  for  charitable  uses ;  and  under  it  all  such  gifts,  unless 
made  as  the  statute  allows,  are  absolutely  void. 

§  53.  "We  never  have  had  any  real  Mortmain  Acts  in  Mas- 
sachusetts. The  nearest  approach  to  one  was  the  provincial 
statute  of  28  George  II,  Acts  1754,  chapter  12,  January  12, 
1755;  3  Prov.  Acts,  page  778.  This  made  deacons  a  cor- 
poration to  take  gifts  for  charitable  purposes,  limited  the 
grants  to  such  as  would  produce  an  income  not  exceeding 
three  hundred  pounds  a  year,  and  provided  that  they  should 
be  made  by  deed  three  months  before  death,  and  that  all 
bequests,  devises  or  later  grants  should  be  void.  This  statute 
related  only  to  gifts  to  deacons  and  was  repealed  b}'  Stat. 
1785,  page  532,  chapter  51  (February  20,  1786),  1  ^Massa- 
chusetts  Laws,  page  282,  which  re-enacted  a  part  of  the  law 
but  omitted  the  provision  that  gifts  not  authorized  by  the 
act  should  be  void.  (Bartlett  v.  King,  12  Mass.  536-545;  7 
Am.  Dec.  99.  See  Eev.  Laws,  c.  37,  §  1.)  The  significance 
of  this  reference  to  English  law  and  to  our  legislation  is, 
first,  that  except  for  this  short  period,  we  have  never  had 
in  Massachusetts  any  legislation  prohibiting  charitable  gifts 
to  trustees  or  corporations  or  providing  that  any  kind  of 
conveyances,  devises  or  bequests  to  corporations  shall  be  void. 
On  the  other  hand,  the  policy  of  the  commonwealth  as  ex- 
pressed both  by  legislation  and  the  decisions  of  its  courts  has 
been  exceedingly  liberal  to  testators  and  public  charities. 
(Sanderson  v.  White,  18  Pick.  328,  333,  334,  29  Am.  Dec. 
591 ;  American  Academy  v.  Harvard  College,  12  Gray,  582, 
595,  596;  Saltonstall  v.  Saunders,  11  Allen,  446;  Jackson  v. 
Phillips,  14  Allen,  539-550.)  Secondly,  the  implied  limita- 
tions upon  the  power  of  corporations  to  hold  property,  which 
appear  in  numerous  enactments,  have  been  made  not  in  the 
interest  of  grantors  or  devisors  or  their  heirs,  but  in  the 
interest  of  the  state  on  considerations  of  public  policy.     The 


53  CHARTER   POWERS.  §  53 

general  form  of  those  limitations  which  appears  in  the  stat- 
ute before  us,  and  with  slight  variations  in  special  charters 
(a  list  of  which,  274  in  number,  granted  in  this  state  prior 
to    1850,    has    been    furnished    us    through    the    industry    of 
counsel),  corresponds  with  the  form  of  licenses  granted  by 
the   Crown  in  England  under  the  old  Mortmain  Acts,   and 
sometimes  embodied  in  charters  granted  by  Parliament.     Un- 
der these  English  acts,  grants  or  devises  to  a  corporation  to 
hold  property  without  a  license  or  in  excess  of  the  amount 
licensed  were  not  void  but  only  voidable  by  the  mesne  lord  or 
the  King  upon  entry  after  inquest  according  to  law.     In  view 
of  the  close  relations  between  Massachusetts  and  the  mother 
country  in  early  times,  this  justifies   an   argument,   of   con- 
siderable strength,  that  the  implied  limitations  in  our  statutes 
were  intended  to  have  no  greater  force  than  the  old  Mortmain 
Acts  of  England,  as  distinguished  from  the  Georgian  Mort- 
main Act.     We  start  with  the  inherent  right,  already  referred 
to,  of  every  corporation  to  take  and  hold  property  at  common 
law  by  virtue  of  the  act  of  its  creation.     This  right  is  recog- 
nized'in  our  statutes  by  implication  without  express  mention. 
(Rev.  Laws,  c.  109,  §§  4-6.)     What  force  is  to  be  given  to 
the  words  'may  hold  real  and  personal  estate  to  an  amount 
not   exceeding"  $1,500,000'?     The  respondent   contends   that 
their  meaning  is  as  if  words  were  added  as  follows:  'And 
beyond  that  amount  it  shall  have  no  right,  as  against  the 
commonwealth,  and  the  commonwealth  may  take  proper  meas- 
ures, through  action  of  the  attorney  general  or  otherwise,  to 
prevent  or  terminate  such  larger  holding.'     According  to  the 
argument,  a  taking  and  holding  by  a  corporation  above  the 
prescribed  amount  is  under  its  inherent  right.     As  between 
it  and  the  state,  as  the  guardian  of  the  public  interest,  a  pro- 
vision as  to  amount  is  made  which  does  not  affect  its  right 
as  to  third  persons.     As  to  the  general  legality  of  the  holding 
except  when  the  state  chooses  to  enforce  the  law  for  its  own 
benefit,  the  condition  is  similar  to  that  resulting  from  a  statu- 
tory  provision   which   is   merely   directory.     It   is   not   very 
unlike  the  old  law  as  to  conveyances  to  aliens.     Such  convey- 
ances, whether  by  grant  or  devise,  were  good  against  everyone 
but  the  state,  and  could  be  set  aside  only  after  office  found. 
(Fox  V.  Southack,   12  Mass.   143;  Waugh  v.  Riley.   8  Met. 
290 ;  Judd  V.  Lawrence,  1  Cush.  531 ;  Kershaw  v.  Kelsey,  100 
Mass.  561,  97  Am.  Dec.  124;  1  Am.  Rep.  142.) 

' '  That  this  is  the  effect  of  such  limitations  in  statutes  of  this 
kind,  where  the  title  of  the  corporation  is  under  a  grant  as 
distinguished  from  a  devise,  seems  to  be  the  universal  rule. 
(Vidal  v.  Philadelphia,  2  How.  127-191,  11  L.  Ed.  205-231; 


§  54  SUMMARY  OF   CORPORATION  LAW.  54 

Rimyan  v.  Coster,  14  Pet.  122,  10  L.  Ed.  382;  Union  Nat.  v. 
Matthews,  98  U.  S.  621,  25  L.  Ed.  188;  Cowell  v.  Colorado 
Springs  Co.,  100  U.  S.  55-60,  25  L.  Ed.  547-550:  Jones  v. 
New  York  Guaranty  &  I.  Co.,  101  U.  S.  622,  25  L.  Ed.  1030 ; 
National  Bank  v.  Whitney,  103  U.  S.  99,  26  L.  Ed.  443 ;  Fritts 
V.  Palmer,  132  U.  S.  282,  33  L.  Ed.  317,  10  Sup.  Ct.  Rep.  93; 
Leazure  v.  Hillep;as.  supra;  Chambers  v.  St.  Louis,  29  Mo. 
543,  9  L.  R.  A.,  N.  S. ;  Banks  v.  Poitiaux,  3  Ptand.  (Va.)  136, 
15  Am.  Dec.  706 ;  Fayette  Land  Co.  v.  Louisville  &  N.  R.  Co. 
93  Va.  274,  24  S.  E.  1016;  Mallett  v.  Simpson,  94  N.  C.  37, 
55  Am.  Rep.  595;  Gilbert  v.  Hole,  2  S.  D.  164,  49  N.  W.  1; 
Barrow  v.  Nashville  &  C.  Turnp.  Co.,  9  Humph.  304 ;  Hough 
V.  Cook  County  Land  Co.,  73  HI.  23,  24  Am.  Rep.  230;  Alex- 
ander V.  Tolleston  Club,  110  111.  65;  Barnes  v.  Suddard,  117 
HI.  237,  7  N.  E.  477;  Hamsher  v.  Hamsher,  132  HI.  273,  8 
L.  R.  A.  556,  23  N.  E.  1123;  Baker  v.  Neff,  73  Ind.  68-70.) 
....  Some  judges,  in  holding  that  such  titles  cannot  be 
taken  under  wills,  endeavor  to  found  a  distinction  upon  the 
executed  character  of  a  title  by  grant,  and  suggest  that  a  de- 
vise or  bequest  is  executory.  It  seems  to  us  there  is  no  good 
reason  for  the  distinction.  When  a  will  is  proved  and  al- 
lowed, it  takes  effect  immediately  to  pass  all  property  affected 
by  it.  The  provision  in  the  law  against  large  holdings  by 
corporations  has  no  relation  to  the  probate  of  the  will.  The 
act  of  the  testator  in  executing  the  will  is  confirmed  and 
given  effect  as  a  complete  and  executed  disposition  of  the 
property,  by  the  allowance  of  the  will.  In  this  respect  a 
recorded  will  does  not  materially  differ  from  a  delivered  deed. 
The  heirs  at  law  are  bound  by  one  as  well  as  by  the  other. 

§  54.  "The  decisions  upon  the  precise  point  at  issue  are  con- 
flicting. In  Jones  v.  Habersham,  107  U.  S.  174,  27  L.  Ed.  401, 
2  Sup.  Ct.  Rep.  336,  a  case  similar  to  that  now  before  us,  it  was 
held  by  the  court  in  an  opinion  by  Mr.  Justice  Gray  that  're- 
strictions imposed  by  the  charter  of  a  corporation  upon  the 
amount  of  property  that  it  may  hold  cannot  be  taken  advan- 
tage of  collaterally  by  private  persons.'  In  the  same  case,  in 
the  circuit  court,  the  question  had  been  considered  previously, 
and  the  same  result  was  reached,  in  an  opinion  by  Mr.  Justice 
Bradley,  of  the  supreme  court  of  the  United  States,  which 
is  found  in  3  Woods,  443-475,  Fed  Cas.  No.  7,465.  The  same 
rule  is  established  in  ]Marvland.  (Hanson  v.  Little  Sisters 
of  the  Poor,  79  Md.  434,  32  L.  R.  A.  293,  32  Atl.  1052 ;  Re 
Stickney  (Congregational  Church  Bldg.  Soc.  v.  Everitt),  85 
Md.  79-104,  60  Am.  St.  Rep.  308,  35  L.  R.  A.  693,  36  Atl. 
654.)     Re  Camp  v.  Dobbins,  29  N.  J.  Eq.  36-40,  was  decided 


55  CHARTER   POWERS.  §  54 

by  the  diancellor  on  this  ground.  The  decree  was  affirmed 
on  another  ground  in  the  court  of  errors  and  appeals  ('S\  N. 
J.  Eq.  671-690),  in  an  opinion  by  Beasley,  C.  J.,  which  con- 
tains a  dictum  disapproving  of  the  view  of  the  chancellor. 
In  Farrington  v.  Putnam,  90  Me.  405,  38  L.  R.  A.  339,  37 
Atl.  652,  tile  court,  in  a  very  elaborate  opinion,  in  a  case  iden- 
tical in  its  leading  features  with  that  now  before  us.  held  that 
the  gift  was  good.  The  same  doctrine  is  stated  in  Brigham 
V.  Peter  Bent  Brigham  Hospital  (C.  C),  126  Fed.  796-801, 
67  C.  C.  A.  393,  134  Fed.  513-527.  It  is  also  stated  in  text- 
books. (Purdy  's  Beach  Corp.,  §  §  5795-5797 ;  2  Thomp.  Corp.. 
§§  5795-5797.)  The  leading  case  which  presents  the  oppo- 
site view  is  Re  McGraw,  supra  (111  N.  Y.  66).  Although 
the  decision  necessarily  puts  a  construction  upon  a  statute 
of  that  state,  this  construction  seems  to  be  materially  affected 
by  the  policy  of  New  York  in  reference  to  charities.  Said 
Judge  Peckham,  who  delivered  the  opinion:  'We  have  a  de- 
cided mortmain  policy.  It  is  found  in  our  statute  relating 
to  wills  prohibiting  a  devise  to  a  corporation,  unless  specially 
permitted  by  its  charter  or  by  isome  statute  to  take  property 
by  devise.'  In  Chamberlain  v.  Chamberlain,  43  N.  Y.  424, 
the  court  refers  to  the  prohibition  of  devises,  and  to  Laws 
1860,  chapter  360,  page  607,  still  in  force,  which  makes  void 
all  bequests  or  devises  to  charity  in  excess  of  one-half  the  tes- 
tator's property  where  he  leaves  relatives.  Other  statutes 
have  been  passed  limiting  the  amount  that  can  be  devised  to 
certain  corporations  by  one  testator,  forbidding  a  devise  or 
bequest  to  charities  by  a  person  leaving  relatives  of  more  than 
one-fourth  of  his  estate,  and  making  void  such  gifts  where 
the  will  was  executed  within  two  months  before  the  death  of 
the  testator.  (4  Heydecker's  Gen.  Laws  (1901),  c.  53,  pp. 
4885,  4891,  4892.)  The  policy  of  that  state  in  regard  to 
charities  has  been  very  unfavorable.  (See  Allen  v.  Stevens, 
161  N.  Y.  122-139,  140,  55  N.  E.  568 ;  People  v.  Powers,  147 
N.  Y.  104,  35  L.  R.  A.  502,  41  N.  E.  432;  Fosdick  v.  Hemp- 
stead, 125  N.  Y.  581,  11  L.  R.  A.  715,  26  N.  E.  801.) 

"The  doctrine  of  the  New  York  court  is  stated  as  the  law 
in  Davidson  College  v.  Chambers,  56  N.  0.  (3  Jones  Eq.)  253, 
and  adopted  in  Wood  v.  Hammond,  16  R.  I.  98-115,  17  Atl. 
324,  18  Atl.  198,  and  House  of  Mercy  v.  Davidson,  90  Tex. 
529,  39  S.  W.  924.  In  the  case  in  North  Carolina  the  decision 
was  by  two  of  the  three  judges  of  the  court,  the  chief  justice 
giving  an  able  dissenting  opinion.  The  courts  in  Kentucky 
and  Tennessee  have  expressed  approval  of  the  McGraw  case 
in  New  York,  but  in  terms  that  do  not  leave  the  grounds  of 
their  decisions  entirely  clear.     (Cromie  v.  Louisville  Orphans' 


§§  55,  56  SUMMARY   OP   CORPORATION    LAW.  56 

Home  Soc,  3  Bush,  365-383;  Hciskell  v.  Chickasaw  Lodore 
No.  8  I.  0.  0.  F.,  87  Tenn.  668-685,  4  L.  R.  A.  699,  11  S.  W. 
825.)  In  reference  to  supposed  errors  in  the  opinion  in  the 
last  case,  see  Pritchard  on  Wills,  §  153,  note,  and  Farrington 
V.  Putnam,  90  Me.  405-433,  38  L.  R.  A.  339,  37  Atl.  652." 

§  55.  In  holding  a  conveyance  to  a  national  bank  for  a  pur- 
pose not  authorized  by  the  charter  not  void  but  voidable, 
Hughes,  J.,  in  Kerfoot  v.  Farmers  &  Merchants'  Bank,  218 
U.  S.  281,  said  (p.  286)  : 

"In  the  absence  of  a  clear  expression  of  legislative  inten- 
tion to  the  contrary,  a  conveyance  of  real  estate  to  a  corpora- 
tion for  a  purpose  not  authorized  by  its  charter  is  not  void, 
but  voidable,  and  the  sovereign  alone  can  object.  Neither  the 
grantor  nor  his  heirs  nor  third  persons  can  impugn  it  upon 
the  ground  that  the  grantee  has  exceeded  its  powers.  Smith 
V.  Sheeley,  12  Wall.  358;  National  Bank  v.  Matthews,  98  U. 
S.  621;  National  Bank  v.  Whitney,  103  U.  S.  99;  Reynolds 
V.  Crawfordsville  Bank,  112  U.  S.  405;  Fritts  v.  Palmer,  ]32 
U.  S.  282." 

§  56.  Where  the  taking  and  holding  of  land  by  the  corpora- 
tion is  not  expressly  prohibited  or  void  by  reason  of  being 
clearly  for  purposes  other  than  those  granted  by  the  charter, 
the  rule  is  now  generally  established  that  only  the  state  can 
question  the  right  of  the  corporation  to  take  in  cases  where  the 
land  has  passed  through  the  corporation  or  title  has  vested  in 
the  corporation,  subject  only  to  such  question.  (Saunders  v. 
Farmer,  62  N.  H.  572 ;  Chicago  B.  &  Q.  R.  Co.  v.  Lewis,  53 
Iowa,  101;  California  State  Tel.  Co.  v.  Alta  Teleg.  Co.,  22 
Cal.  398 ;  Hamsher  v.  Hamsher,  132  111.  273 ;  Hough  v.  Cook 
County  Land  Co.,  73  111.  23;  In  re  Stickney,  85  Md.  79; 
Brigham  v.  Peter  Bent  Brigham  Hospital,  126  Fed.  796; 
Eliot's  Appeal,  74  Conn.  586;  Kelly  v.  People's  Transporta- 
tion Co.,  3  Or.  189;  Natoma  Water  etc.  Co.  v.  Clarkin,  14 
Cal.  544;  Hay  ward  v.  Davidson,  41  Ind.  212;  Jones  v.  Haber- 
sham, 107  U.  S.  174 ;  Fritts  v.  Palmer,  132  U.  S.  282 ;  Kerfoot 
v.  Farmers  &  Merchants'  Bank,  218  U.  S.  281;  Thompson,  2d 
ed.,  §  2391.) 

But  where,  by  reason  of  the  transaction  being  executory, 
the  corporation  must  ask  the  aid  of  the  court  to  perfect  its 


57  CHARTER   POWERS.  §  56 

right,  the  individual  interested  may  question  the  power  of  the 
corporation.  (Case  v.  Kelly,  133  U.  S.  21;  Coleman  v.  S.  R. 
T.  R.  Co.,  49  Cal.  517 ;  Pacific  R.  Co.  v.  Seely,  45  Mo.  212 ; 
South  &  N.  A.  R.  Co.  V.  Highland  Ave.  &  B.  R.  Co.,  119 
Ala.  105  J  United  States  v.  Northern  Pac.  R.  Co.,  152  U.  S. 
284.) 


§§  60,  61  SUMMARY    OF    CORPORATION    LAW.  58 


CHAPTER  IV. 

ULTRA  VIRES  TRANSACTIONS. 

§  60.  A  contract  or  transaction  of  a  corporation  not  au- 
thorized expressly  or  impliedly  by  its  charter,  being  for  that 
reason  usually  termed  ultra  vires,  has  no  legal  validity,  and 
will  not  on  any  ground  be  recognized  or  enforced  by  the  courts, 
for  the  reason  that  such  contracts  are  void  per  se  and  that  it  is 
contrary  to  public  policy  to  validate  and  breathe  life  judi- 
cially into  usurpation  of  rights  and  powers  by  corporations. 
On  the  other  hand,  it  is  manifestly  unjust  for  a  corporation 
to  receive  the  benefit  of  a  contract  and  then  shake  off  the  bur- 
den by  denying  its  own  authority  to  enter  into  the  contract. 
This  dilemma  has  resulted  in  some  confusion  in  the  adjudi- 
cated cases  dealing  with  ultra  vires  contracts  and  transactions 
with  attempted  distinctions  not  always  adhered  to  between 
executed,  partly  executed  and  executory  contracts,  the  mass, 
as  a  whole,  being  leavened  but  not  clarified  by  the  frequent 
use  of  the  word  "estoppel,"  of  much  or  little  meaning.  It 
is  now  pretty  well  settled,  however,  that  an  ultra  vires  con- 
tract or  transaction  has  no  legal  validity,  and  is  regarded 
and  treated  as  such  by  the  courts,  but  that  where  it  has  been 
so  far  executed  on  both  sides  that  it  is  vain  to  attempt  to  re- 
store the  parties  to  the  status  in  which  they  would  be  but  for 
the  contract  or  transaction,  the  courts  leave  them  where  they 
find  them,  and  where  the  contract  or  transaction  has  been 
partly  executed,  the  courts  will,  in  cases  where  justice  requires 
it,  and  in  a  quantum  meruit  or  other  appropriate  proceeding 
instituted  for  the  purpose,  enforce  restoration,  so  far  as  may 
be  possible,  of  the  status  of  the  parties,  if  there  had  been  no 
sueii  contract  or  transaction,  not  by  way  of  recognizing  the 
contract,  but  on  the  basis  of  its  being  a  nullity. 

§  61.  "A  contract  of  a  corporation,  which. is  ultra  vires,  in 
the  pr-oper  sense,  that  is  to  say,  outside  the  object  of  its  creation 
as  defined  in  the  law  of  its  organization,  and  therefore  beyond 


59  ULTRA  VIRES  TRANSACTIONS.  §  62 

the  powers  conferred  upon  it  by  the  legislature,  is  not  voidable 
only,  but  wholly  void  and  of  no  legal  effect.  The  objection 
to  the  contract  is  not  merely  that  the  corporation  ought  not 
to  have  made  it,  but  that  it  could  not  make  it.  The  contract 
cannot  be  ratified  by  either  party,  because  it  could  not  have 
been  authorized  by  either.  No  performance  on  either  side 
can  give  the  unlawful  contract  any  validity  or  be  the  founda- 
tion of  any  right  of  action  upon  it. 

"When  a  corporation  is  acting  within  the  general  scope  of 
the  powers  conferred  upon  it  by  the  legislature,  the  corpora- 
tion, as  well  as  persons  contracting  with  it,  may  be  estopped 
to  deny  that  it  has  complied  with  the  legal  formalities  which 
are  prerequisite  to  its  existence  or  to  its  action,  because  such 
requisites  might,  in  fact,  have  been  complied  with.  But  when 
the  contract  is  beyond  the  powers  conferred  upon  it  by  existing 
laws,  neither  the  corporation  nor  the  other  party  to  the  con- 
tract can  be  estopped,  by  assenting  to  it,  or  by  acting  upon 
it,  to  show  that  it  was  prohibited  by  those  laws. 

"The  doctrine  of  the  common  law,  by  v.'hich  a  tenant  of  real 
estate  is  estopped  to  deny  his  landlord's  title,  has  never  been 
considered  by  this  court  as  applicable  to  leases  by  railroad 
corporations  of  their  roads  and  franchises.  It  certainly  has 
no  bearing  upon  the  question  whether  this  defendant  may  set 
up  that  the  lease  sued  on,  which  is  not  of  real  estate,  but  of 
personal  property,  and  which  includes,  as  inseparable  from 
the  other  property  transferred,  the  inalienable  franchise  of  the 
plaintiff,  is  unlawful  and  void,  for  want  of  legal  capacity  in 
the  plaintiff  to  make  it. 

§  62,  "A  contract  ultra  vires  being  unlawful  and  void,  not 
because  it  is  in  itself  immoral,  but  because  the  corporation,  by 
the  law  of  its  creation,  is  incapable  of  making  it,  the  courts, 
v^'hile  refusing  to  maintain  any  action  upon  the  unlawful  con- 
tract, have  always  striven  to  do  justice  between  the  parties, 
so  far  as  could  be  done  consistently  with  adherence  to  law, 
by  permitting  property  or  money,  parted  with  on  the  faith 
of  the  unlawful  contract,  to  be  recovered  back  or  compensa- 
tion to  be  made  for  it. 

"In  such  case,  however,  the  action  is  not  maintained  upon 
the  unlawful  contract,  nor  according  to  its  terms;  but  on  an 
implied  contract  of  the  defendant  to  return  or,  failing  to  do 
that,  to  make  compensation  for  property  or  money  which  it 
has  no  right  to  retain.  To  maintain  such  an  action  is  not  to 
af!irm,  but  to  disaffirm,  the  unlawful  contract. 

"The  ground  and  the  limits  of  the  rule  concerning  the  rem- 
edy, in  the  case  of  a  contract  ultra  vires  which  has  been 


§  63  SUMMARY   OF   CORPORATION   LAW.  60 

partly  performed  and  under  which  property  has  passed,  can 
hardly  be  summed  up  better  than  they  were  by  Mr.  Justice 
Miller  in  a  passage  already  quoted,  where  he  said  that  the 
rule  'stands  upon  the  broad  ground  that  the  contract  itself  is 
void  and  that  nothing  which  has  been  done  under  it,  nor  the 
action  of  the  court,  can  infuse  any  vitality  into  it';  and  that 
'where  the  parties  have  so  far  acted  under  such  a  contract  that 
they  cannot  be  restored  to  their  original  condition,  the  court 
inquires  if  relief  can  be  given  independently  of  the  contract 
or  whether  it  will  refuse  to  interfere  as  the  matter  stands.' 
Pennsylvania  R.  R.  v.  St.  Louis  etc.  R.  R.,  118  U.  S.  317." 
(Gray,  J.,  in  holding  an  action  for  suit  under  an  ultra  vires 
lease  not  maintainable,  in  Central  Transp.  Co.  v.  Pullman's 
Car  Co.,  139  U.  S.  24,  p.  59.) 

§  63.  In  allowing  recovery  by  way  of  quantum  meruit  of 
property  parted  with  under  an  ultra  vires  lease,  Peckham,  J,, 
in  Pullman's  Car  Co.  v.  Transportation  Co.,  171  U.  S.  138, 
p.  149,  said: 

"This  brings  us  to  a  discussion  of  the  principles  upon  which 
a  recovery  in  this  case  should  be  founded.  The  so-called  lease 
mentioned  in  this  case  has  been  already  pronounced  illegal 
and  void  by  this  court.  (139  U.  S.  24.)  The  contract  or 
lease  was  held  to  be  unlawful  and  void  because  it  was  beyond 
the  powers  conferred  upon  the  Central  Company  by  the  legis- 
lature, and  because  it  involved  an  abandonment  by  that  com- 
pany of  its  duty  to  the  public It  was    argued  on  the 

part  of  the  Central  Company  that  even  if  the  contract  sued  on 
were  void,  yet  that  having  been  fully  performed  on  the  part 
of  the  lessor,  and  the  benefits  of  it  received  by  the  lessee  for 
the  period  covered  by  the  declaration  in  that  case,  the  de- 
fendant should  be  estopped  from  setting  up  the  invalidity  of 
the  contract  as  a  defense  to  the  action  to  recover  compensation 
for  that  period.  But  it  was  answered  that  this  argument, 
though  sustai'ned  by  the  decisions  in  some  of  the  states,  finds 
no  support  in  the  judgment  of  this  court,  and  cases  in  this 
court  were  cited  in  which  such  recoveries  were  denied. 

"It  is  true  that  courts  in  different  states  have  allowed  a 
recoverv  in  such  cases,  among  the  latest  of  which  is  the  case 
of  Bath  Gas  Light  Co.  v.  Clatfy,  151  N.  Y.  24,  where  Chief 
Judge  Andrews,  of  the  court  of  appeals,  examines  the  various 
cases,  and  that  court  concurred  with  him  in  permitting  a  re- 
covery of  rent  upon  a  void  lease,  where  the  lessee  had  en- 
joyed the  benefits  of  the  possession  of  the  property  of  the 


61  ULTRA  VIRES  TRANSACTIONS.  §  64 

lessor  (luring  the  time  for  which  the  recovery  of  rent  was 
sought. 

"But  in  the  case  of  this  lease  now  before  the  court,  a  re- 
covery of  the  rent  due  thereunder  was  denied  the  lessor,  al- 
though the  lessee  had  enjoyed  the  possession  of  the  property 
in  accordance  with  the  terms  of  the  lease,  ....  and  the  opin- 
ion of  the  court  ended  with  the  statement  that  'Whether  this 
plaintiff  could  maintain  any  action  against  this  defendant  in 
the  nature  of  a  quantum  meruit  or  otherwise  independently 
of  the  contract,  need  not  be  considered,  because  it  is  not  pre- 
sented by  this  record  and  has  not  been  argued.  This  action, 
according  to  the  declaration  and  evidence,  was  brought  and 
prosecuted  for  the  single  purpose  of  recovering  sums  which 
the  defendant  had  agreed  to  pay  by  the  unlawful  contract, 
and  which,  for  the  reasons  and  upon  the  authorities  above 
stated,  the  defendant  was  not  liable  for. ' 

§  64.  "The  principle  is  not  new,  but,  on  the  contrary,  it  has 
been  frequently  announced,  commencing  in  cases  considerably 
over  a  hundred  years  old.  It  was  said  by  Lord  Mansfield,  in 
Holman  v.  Johnson,  1  Cowp.  341,  decided  in  1775,  that  'the  ob- 
jection that  a  contract  is  immoral  or  illegal  as  between  the 
plaintiff  and  defendant  sounds  at  all  times  very  ill  in  the 
mouth  of  the  defendant.  It  is  not  for  his  sake,  however,  that 
the  objection  is  ever  allowed;  but  it  is  founded  in  general 
principles  of  policy,  which  the  defendant  has  the  advantage 
of,  contrary  to  the  real  justice  as  between  him  and  the  plain- 
tiff— by  accident,  if  I  may  say  so.  The  principle  of  public 
policy  is  this:  ex  dolo  malo  non  oritur  actio.  No  court  will 
lend  its  aid  to  a  man  who  founds  his  cause  of  action  upon  an 
immoral  or  an  illegal  act.' 

"The  cases  upholding  this  doctrine  are  numerous  and  em- 
phatic  They  are  substantially  unanimous  in  express- 
ing the  view  that  in  no  way  and  through  no  channels,  directly 
or  indirectly,  will  the  courts  allow  an  action  to  be  maintained 
for  the  recovery  of  property  delivered  under  an  illegal  con- 
tract, where  in  order  to  maintain  such  recovery  it  is  necessary 
to  have  recourse  to  that  contract.  The  right  of  recovery  must 
rest  upon  a  disaffirmance  of  the  contract,  and  it  is  permitted 
only  because  of  the  desire  of  courts  to  do  justice  as  far  as 
possible  to  the  party  who  has  made  payment  or  delivered  prop- 
erty under  a  void  agreement,  and  which  in  justice  he  ought  to 
recover.  But  courts  will  not,  in  such  endeavor,  permit 
any  recovery  which  will  weaken  the  rule  founded  upon  the 
principles  of  public  policy  already  noticed." 


§§  65,  66  SUMMARY   OF   CORPORATION   LAW.  62 

§  65.  "The  doctrine  of  ultra  vires  by  which  a  contract  made 
by  a  corporation  beyond  the  scope  of  its  corporate  powers  is 
unlawful  and  void,  and  will  not  support  an  action,  rests,  as  this 
court  has  often  recognized  and  affirmed,  upon  three  distinct 
grounds:  The  obligation  of  anyone  contracting  with  a  cor- 
poration to  take  notice  of  the  legal  limits  of  its  powers ;  the 
interest  of  the  stockholders  not  to  be  subject  to  risks  which 
they  have  never  undertaken ;  and  above  all,  the  interest  of  the 
public  that  the  corporation  shall  not  transcend  the  powers 
conferred  upon  it  by  law.  Pearce  v.  Madison  &  Indianapolis 
R.  R.,  21  How.  441 ;  Pittsburg  etc.  Ry.  v.  Keokuk  &  Hamil- 
ton Bridge  Co.,  131  U.  S.  371,  384;  Central  Transp.  Co.  v. 
Pullman's  Car  Co.,  139  U.  S.  24,  48. 

"When  the  corporation  is  created  by  a  charter  granted  by 
the  legislature,  any  person  dealing  with  it  is  bound  to  take 
notice  of  the  terms  of  the  charter  and  of  the  general  laws  re- 
stricting or  defining  the  powers  of  the  corporation.  Pearce 
V.  Madison  &  Indianapolis  R.  R.,  above  cited;  Zabriskie  v. 
Cleveland  etc.  R.  R!,  23  How.  381,  398;  Thomas  v.  Railroad 
Co.,  101  U.  S.  71 ;  Penn.sylvania  R.  R.  v.  St.  Louis  R.  R.,  118 
U.  S.  290,  630.  In  like  manner,  when  the  corporation  is 
formed  under  general  laws,  by  the  recording  or  filing  in  a 
public  office  of  the  required  articles  of  association  and  cer- 
tificate, any  person  dealing  with  the  association  is  bound  to 
take  notice  of  the  documents  recorded  or  filed,  upon  which, 
as  authorized  and  controlled  by  the  general  laws,  depend  the 
existence  of  the  corporation,  the  extent  of  its  corporate  powers, 
and  its  capacity  to  act  as  a  corporation.  Oregon  Ry.  v.  Ore- 
gonian  Ry.,  130  U.  S.  1,  25;  Central  Transp.  Co.  v.  Pullman's 
Car  Co.,  above  cited."  (Gray,  J.,  in  holding  that  a  lease 
made  by  a  national  bank  before  being  authorized  to  do  busi- 
ness was  void  and  not  capable  of  being  enforced  by  estoppel 
or  otherwise,  in  McCormick  v.  Market  Bank,  165  U.  S.  538, 
p.  549.) 

§  66.  "Whatever  divergence  of  opinion  may  arise  on  this 
question  from  conflicting  adjudications  in  some  of  the  state 
courts,  in  this  court  it  is  settled  in  favor  of  the  right  of  the  cor- 
poration to  plead  its  want  of  power,  that  is  to  say,  to  assert 
the  nullity  of  an  act  which  is  an  ultra  vires  act.  The  cases  of 
Thomas  v.  Railroad  Co.,  101  U.  S.  71,  Pennsylvania  R.  R.  v.  St. 
Louis  etc.  R.  R.,  118  U.  S.  290,  Oregon  Ry.  &  Nav.  Co.  v.  Ore- 
gonian  Ry.  Co.,  130  U.  S.  1,  Pittsburg  etc.  Ry.  v.  Keokuk  & 
Hamilton  Bridge  Co.,  131  U.  S.  371,  Central  Transp.  Co.  v. 
Pullman's  Car  Co.,  139  U.  S.  24,  St.  Louis  etc.  R.  R.  v.  Terre 
Haute  &  Indianapolis  R.  R.,  145  U.  S.  393,  Union  Pacific  Ry. 


C3  ULTRA  VIRES  TRANSACTIONS.  §§  67,  68 

V.  Chicago  etc.  Ry.,  163  U.  S.  564,  and  :MeCormick  v.  Market 
Nat.  Bank,  165  ij.  S.  538,  recognize  as  sound  doctrine  that 
the  powers  of  corporations  are  such  only  as  are  conferred  upon 
them  by  statute The  doctrine  thus  enunciated  is  like- 
wise that  which  obtains  in  England.  Ashbury  Railway  Car- 
riage &  Iron  Co.  V.  Riche,  L.  R.  7  H.  L.  653 ;  Attorney  General 
V.  Great  Eastern  Ry.  Co.,  5  App.  Cas.  473;  Baroness  Wenlock 
V.  The  River  Dee  Co.,  10  App.  Cas.  354;  Trevor  v.  Whitworth, 
12  App.  Cas.  409;  Ooregum  Gold  ]\lin.  Co.  of  India  v.  Roper, 
[1892]  App.  Cas.  125;  Mann  v.  Edinburgh  Northern  Tram- 
ways, [1893]  App.  Cas.  69."  (White,  J.,  in  California  Bank 
V.  Kennedy,  167  U.  S.  362,  p.  367.) 

§  67.  The  rule  that  contracts  ultra  vires  the  charter  of  a 
corporation  are  void  and  will  not  be  enforced  nor  recognized  as 
having  validity  is  thus  well  established  in  the  United  States 
supreme  court  and  in  the  English  courts.  The  only  departure 
in  the  United  States  supreme  court  is  perhaps  the  attitude  of 
the  court  in  cases  of  real  property  conveyed  to  a  corporation  in 
excess  of  charter  powers.  There  can  be  no  difference  in  prin- 
ciple whether  the  subject  matter  of  an  ultra  vires  contract  be 
land  or  something  else,  except  upon  the  theory  illustrated 
supra,  that  in  America,  as  well  as  in  England,  a  corporation 
has  implied  power  to  hold  land  except  as  positively  prohibited 
from  so  doing.  The  court,  however,  has  gone  very  far  in 
holding  that  a  conveyance  of  land  to  a  corporation  cannot  be 
questioned  collaterally,  not  merely  where  it  is  ultra  vires  but 
even  when  expressly  prohibited.  Such  a  rule  cannot  be  sup- 
ported consistently  with  the  general  rule  respecting  ultra  vires 
contracts  heretofore  set  out,  except  on  the  ground,  possibly, 
in  particular  cases  that,  the  contract  being  executed,  the  court 
is  unable  in  the  particular  instance  to  restore  the  parties  to 
the  status  quo. 

§  68.  In  Fritts  v  Balmer,  132  U.  S.  282,  in  an  action  in 
ejectment,  in  holding  that  a  conveyance  to  a  foreign  corpora- 
tion contrary  to  express  statutory  prohibition  could  not  be 
questioned  by  the  plaintiff,  Harlan,  J.,  in  delivering  the 
opinion  of  the  court,  said : 

"In  National  Bank  v.  Matthews,  98  U.  S.  621,  627,  the  ques- 
tion was  directly  presented  whether  a  national  bank  was  en- 


§  68  SUMMARY   OF    CORPORATION   LAW.  64 

titled  to  the  benefit  of  a  deed  of  trust  upon  real  estate  which 
with  the  note  described  in  it  was  taken — not  as  security  for, 
or  in  satisfaction  of,  debts  previously  contracted  in  the  course 
of  its  dealings,  but — for  a  loan  made  by  the  bank  at  the  time 
the  deed  of  trust  was  assigned  to  it.  The  supreme  court  of 
Missouri  held  the  deed  of  trust  to  be  void  in  the  hands  of  the 
bank,  because  its  loan  was  made  upon  real  estate  security  in 
violation  of  the  statute.  But  this  court,  after  observing  that 
the  result  insisted  upon  did  not  necessarily  follow,  said : 

"  'The  statute  does  not  declare  such  a  security  void.  It  is 
silent  upon  the  subject.  If  Congress  so  meant,  it  would  have 
been  easy  to  say  so ;  and  it  is  hardly  to  be  believed  that  this 
would  not  have  been  done,  instead  of  leaving  the  question  to 
be  settled  by  the  uncertain  result  of  litigation  and  judicial 
decision.  Where  usurious  interest  is  contracted  for,  a  for- 
feiture is  prescribed  and  explicitly  defined.'  Again:  'Where 
a  corporation  is  incompetent  by  its  charter  to  take  a  title  to 
real  estate,  a  conveyance  to  it  is  not  void  but  only  voidable, 
and  the  sovereign  alone  can  object.  It  is  valid  until  assailed 
in  a  direct  proceeding  instituted  for  that  purpose. ' 

"In  National  Bank  v.  Whitney,  103  U.  S.  99,  103,  which  in- 
volved the  validity  of  a  mortgage  to  a  national  bank  to  secure 
future  advances  made  to  the  mortgagor,  the  right  of  the  bank 
to  enforce  the  mortgage  was  sustained  upon  the  principles  an- 
nounced in  National  Bank  v.  Matthews.  The  court  said: 
'Whatever  objection  there  may  be  to  it  as  security  for  such 
advances  from  the  prohibitory  provisions  of  the  statute,  the 
objection  can  only  be  urged  by  the  government.'  To  the  same 
effect  are  Swope  v.  Leffingwell,  105  U.  S.  3,  and  Revnolds  v. 
Crawfordsville  Bank,  112  U.  S.  405,  412. 

"In  Smith  v.  Shelley,  12  Wall.  358,  361,  which  was  an  ac- 
tion of  ejectment,  the  question  was  collaterally  raised  as  to  the 
validity  of  the  title  acquired  by  a  banking  institution,  under 
a  deed  of  the  premises,  in  consideration  of  a  certain  sum  paid 
by  it  to  the  grantor.  The  bank  was  created  by  an  act  of  the 
territorial  legislature  of  Nebraska,  with  power  'to  issue  bills, 
deal  in  exchange  and  buy  and  possess  property  of  every  kind.* 
But  when  that  act  passed  there  was  in  force  an  act  of  Con- 
gress which  provided  that  'no  act  of  the  territorial  legislature 
of  any  of  the  territories  of  the  United  States,  incorporating 
any  bank  or  any  institution  with  banking  powers  or  privileges 
hereafter  to  be  passed,  shall  have  any  force  or  effect  whatever, 
until  approved  and  confirmed  by  Congress.'  The  act  of  the 
territorial  legislature  incorporating  the  bank  above  referred 
to  never  was  approved  or  confirmed  by  Congress.  It  was 
urged,  as  an  objection  to  the  deed  made  to  the  bank — upon 


65  ULTRA  VIRES  TRANSACTIONS.  §  69 

which  deed  one  of  the  parties  relied — that  it  was  not  a  com- 
petent grantee  to  receive  title.  This  court  said:  'It  is  not 
denied  that  the  bank  was  duly  organized  in  pursuance  of  the 
provisions  of  an  act  of  the  legislature  of  the  territory  of 
Nebraska;  but  it  is  said  it  had  no  right  to  transact  business 
until  the  charter  creating  it  was  approved  by  Congress.  This 
is  so,  and  it  could  not  legally  exercise  its  powers  until  this 
approval  was  obtained;  but  this  defect  in  its  constitution  can- 
not be  taken  advantage  of  collaterally.  No  proposition  is 
more  thoroughly  settled  than  this,  and  it  is  unnecessary  to 
refer  to  authorities  to  support  it.  Conceding  the  bank  to  be 
guilty  of  usurpation,  it  was  still  a  body  corporate  de  facto, 
exercising  at  least  one  of  the  franchises  which  the  legislature 
attempted  to  confer  upon  it;  and,  in  such  a  case,  the  party 
who  makes  a  sale  of  real  estate  to  it  is  not  in  a  position  to  ques- 
tion its  capacity  to  take  the  title,  after  it  has  paid  the  con- 
sideration for  the  purpose.  If,  prior  to  the  execution  of  the 
deed,  there  had  been  a  judgment  of  ouster  against  the  corpora- 
tion at  the  instance  of  the  government,  the  aspect  of  the  ease 
would  be  different.'  See,  also,  Myers  v.  Croft,  13  Wall.  291, 
295 ;  Jones  v.  Guaranty  and  Indemnity  Co.,  101  U.  S.  622,  628 ; 
Fortier  v.  New  Orleans  Bank,  112  U.  S.  439,  451. 

"To  the  above  cases  may  be  added  those  holding  that  an 
alien  may  take  by  deed  or  devise  and  hold  against  anyone  but 
the  sovereign  until  office  found:  Cross  v.  De  Valle,  1  Wall.  1, 
13 ;  Governeur  v.  Robertson,  11  Wheat.  332 ;  National  Bank  v. 
Matthews,  98  U.  S.  621,  628 ;  Phillips  v.  Moore,  100  U.  S.  208. 
Also  those  holding  that  the  question  whether  a  corporation, 
having  capacity  to  purchase  and  hold  real  estate  for  certain 
defined  purposes,  or  in  certain  quantities,  has  taken  title  to 
real  estate  for  purposes  not  authorized  by  law,  or  in  excess  of 
the  quantity  permitted  by  its  charter  concerns  only  the  state 
within  whose  limits  the  property  is  situated.  It  cannot  be 
raised  collaterally  by  private  persons  unless  there  be  something 
m  the  statute  expressly  or  by  necessary  impli'cation  authoriz- 
ing them  to  do  so:  Cowell  v.  Springs  Co.,  100  U.  S.  55,  60; 
Jones  V.  Habersham,  107  U.  S.  174,  188." 

§  69.  Miller,  J.,  dissenting  from  this  opinion  of  Harlan,  J., 
said  (p.  294)  : 

"I  can  conceive  of  eases  where  corporations  have  been  au- 
thorized to  acquire  a  limited  amount  of  real  estate  such  as  the 
legislature  may  conceive  to  be  useful  and  necessary  to  the  pur- 
pose for  which  they  are  organized,  or  to  take  property  for 
specific  uses,  in  which  the  question  as  to  whether  they  have  ex- 
5 


§  70  SUMMARY   OF    CORPORATION   LAW.  66 

ceeded  that  amount  or  perverted  the  use  may  be  one  for  the 
state  alone  and  not  of  any  private  citizen.  But  the  positive 
declaration  that  a  corporation  shall  not  purchase  or  hold  real 
estate,  which  is  not  a  grant  of  power,  but  an  express  denial 
of  its  power  to  hold  any  real  estate  under  the  circumstances 
mentioned,  is,  in  my  opinion,  destructive  of  the  right  to  hold 
any  real  estate  at  ail  under  those  circumstances.  Whenever  it 
is  shown  that  any  of  these  corporations  have  not  complied  with 
the  requirements  of  the  statute,  they  are  forbidden  to  purchase 
or  hold  real  estate.  Any  such  purchase  is  therefore  void.  It 
is  the  positive  declaration  of  the  law  of  the  land.  The  title 
does  not  pass,  and  it  needs  no  inquest  on  the  part  of  the  state 
to  establish  that  fact.  The  title  which  would  have  passed  if 
the  corporation  had  a  right  to  purchase  does  not  pass.  It  re- 
mains in  the  party  who  attempted  to  grant  or  convey  it.  The 
grantee  can  neither  purchase  nor  hold  real  estate.  The  as- 
sumption of  the  opinion  of  the  court  is  that  it  may  purchase 
and  it  may  hold  real  estate." 

§  70.  In  holding  that  the  court  would  not  enforce  an  un- 
executed contract  for  the  conveyance  of  lands  to  a  corporation 
unauthorized  by  its  charter  to  hold  the  lands,  Miller,  J.,  in 
Case  V.  Kelly,  133  U.  S.  21,  p.  28,  said: 

"It  is  next  objected  to  the  principle  adopted  by  the  court 
that  the  limitation  upon  the  power  of  the  corporation  to  re- 
ceive land  is  one  which  concerns  the  state  alone,  and  the  title 
to  such  lands  in  a  corporation  can  only  be  defeated  by  a  pro- 
ceeding in  the  nature  of  a  quo  warranto  on  behalf  of  the  state. 
The  case  of  National  Bank  v.  Matthews,  98  U.  S.  621,  is  strenu- 
ously relied  on  to  support  this  view.  We  need  not  stop  here 
to  inquire  whether  this  company  can  hold  title  to  lands  which 
it  is  impliedly  forbidden  to  do  by  its  charter,  because  the  case 
before  us  is  not  one  in  which  the  title  to  the  lands  in  ques- 
tion has  ever  been  vested  in  the  railroad  company  or  attempted 
to  be  so  vested.  The  railroad  company  is  plaintiff  in  this  ac- 
tion and  is  seeking  to  obtain  the  title  to  such  lands.  It  has 
no  authority  by  the  statute  to  receive  such  title  and  to  own 
such  lands,  and  the  question  here  is  not  whether  the  courts 
would  deprive  it  of  such  lands  if  they  had  been  conveyed  to 
it,  but  whether  they  will  aid  it  to  violate  the  law  and  obtain  a 
title  which  it  has  no  power  to  hold.  We  think  the  questions 
are  very  different  ones,  and  that  while  a  court  might  hesitate 
to  declare  the  title  to  lands  received  already  and  in  the  posses- 
sion and  ownership  of  the  company  void,  on  the  principle  that 
they  had  no  authority  to  take  such  lauds,  it  is  very  clear  that 


67  ULTRA  VIRES  TRANSACTIONS.  §  71 

it  will  not  make  itself  the  active  agent  in  behalf  of  the  com- 
pany in  violating  the  law  and  enabling  the  company  to  do  that 
which  the  law  forbids." 

In  holding  a  bequest  to  a  corporation  of  property  in  excess 
of  the  amount  authorized  by  the  charter  valid,  Gray,  J.,  in 
Jones  V.  Habersham,  107  U.  S.  174,  p.  188,  said: 

"Restrictions  imposed  by  the  charter  of  a  corporation  upon 
the  amount  of  property  that  it  may  hold  cannot  be  taken 
advantage  of  collaterally  by  private  persons,  but  only  in  a 
direct  proceeding  bv  the  state  which  created  it.  Runyan  v. 
Coster,  14  Pet.  122,^131;  Smith  v.  Shelley,  12  Wall.  358,  361; 
Bogardus  v.  Trinity  Church,  4  Sand.  Ch.  (N.  Y.)  633,  758; 
De^Camp  v.  Dobbins,  29  N.  J.  Eq.  36 ;  Davis  v.  Old  Colony  R. 
R.  Co.,  131  Mass.  258,  273." 

§  71.  In  view  of  Case  v.  Kelly,  supra,  however,  it  is  prob- 
able that  this  rule  expressed  in  Jones  v.  Habersham  will  be 
confined,  in  instances  of  statutory  prohibition,  to  cases  where 
contracts  and  transactions  have  so  far  been  executed  that 
it  is  practically  impossible  for  the  court  to  do  justice  to  the 
parties  by  its  interposition. 

It  is  to  be  noted,  moreover,  that  in  cases  where  a  corporation 
is  authorized  by  its  charter  to  hold  land  for  certain  purposes, 
the  question  whether  any  particular  piece  of  land  is  within  the 
authorized  purposes  may  not  be  inquired  into  collaterally,  for 
the  reason,  among  others,  that  the  public,  in  dealing  with  the 
corporation,  should  not  be  required,  for  obvious  reasons  of  pub- 
lic policy,  to  take  the  risk  of  a  right  or  erroneous  decision  upon 
the  question  for  the  determination  of  which  they  cannot  ordi- 
narily have  requisite  facts  and  data. 

In  Cowell  V.  Springs  Co.,  100  U.  S.  55,  p.  60,  Field,  J.,  said: 

**  A  corporate  body  competent  to  exercise  some  of  the  powers 
mentioned  was  created,  and  under  the  statute  of  the  territory 
could  acquire  and  hold  or  convey,  by  deed  or  otherwise,  any 
real  or  personal  estate  whatever,  necessary  to  enable  it  to  carry 
on  its  business.  Whether  the  particular  premises  in  contro- 
versy are  necessary  for  that  business  is  not  important;  that  is 
a  matter  between  the  government  of  the  state,  succeeding  that 
of  the  territory  and  the  corporation  and  is  no  concern  of  the 
defendant.  It  Avould  create  great  inconvenience,  and  embar- 
rassments if  in  actions  by  corporations  to  recover  the  posses- 


§  75  SUMMARY   OF   CORPORATION   LAW.  68 

sion  of  their  real  property  an  investigation  was  permitted  into 
the  necessity  of  such  property  for  the  purposes  of  their  incor- 
poration and  the  title  made  to  rest  upon  the  proof  of  that 
necessity.  Natoma  Water  &  Mining  Co.  v.  Clarkin,  14  Cal. 
552." 


ESTOPPEL     TO     SET     UP     ULTRA     VIRES     AS     A 

DEFENSE. 

§  75.  Generally  speaking,  a  person  who  has  held  out  par- 
ticular facts  as  true  and  has  thereby  induced  others  to  act 
in  reliance  thereon  to  their  detriment,  is  held  estopped  from 
setting  up  the  contrary  to  be  the  actual  fact. 

This  rule  has  been  invoked  in  some  jurisdictions  to  permit 
recovery  on  a  contract  of  a  corporation  ultra  vires  its  charter 
powers  where  the  contract  has  been  partly  performed  to  the 
benefit  of  one  of  the  parties,  on  the  ground  that  it  is  unjust 
to  allow  the  party  to  receive  the  benefit  and  then  set  up  his 
own  wrongdoing  as  an  excuse  to  avoid  responsibility  to  per- 
form his  part.  It  is  frequently  said  that  the  plea  of  ultra 
vires  should  not  be  allowed  to  prevail  where  it  would  not 
advance  justice,  but,  on  the  contrary,  would  accomplish  a 
legal  wrong. 

This  sounds  plausible,  but  will  hardly  bear  cursory  inspec- 
tion, for  it  assumes  the  conclusion  as  to  legal  wrong  and 
ignores  the  very  fact  that  an  ultra  vires  contract  is  unlawful, 
and  therefore  at  best  it  amounts  to  saying  that  the  court  will 
enforce  a  legal  wrong  to  avoid  a  legal  wrong.  If  contracts 
ultra  vires  corporate  charters  be  contrary  to  public  policy,  as 
generally  conceded,  then  their  enforcement  because  partially 
executed  ignores  the  public  wrong  for  the  sake  of  doing  ap- 
parent justice  between  the  parties  in  the  particular  case  at 
bar.  Estoppel  cannot  be  invoked  to  support  illegal  transac- 
tions. Contracts  to  perform  tortious  or  other  illegal  acts  are 
unenforceable,  and  no  partial  performance  will  estop  the  de- 
fense. It  would  seem  that  ultra  vires  contracts  are  not  less 
unlawful  merely  because  not  expressly  prohibited.  The  im- 
mediate injustice  between  the  parties  at  bar,  as  abundantly 
appears  elsewhere,  can  be  adequately  remedied  otherwise  than 


69  ULTRA  VIRES  TRANSACTIONS.  §  76 

by  subverting  public   policy,   thus   giving  legal  sanction  to 
wrong  on  the  plea  of  preventing  wrong. 

§  76.  Several  state  jurisdictions,  however,  enforce  ultra 
vires  contracts  on  the  basis  of  estoppel,  as  is  illustrated  by  the 
following  cases. 

In  Bissell  v.  Michigan  S.  &  N.  I.  R.  Co.,  22  N.  Y.  262,  it 
was  held  that  where  two  railroad  companies,  in  excess  of  their 
powers,  combined  to  operate  a  third  road,  they  were  liable 
for  injuries  sustained  by  a  passenger  on  such  road,  resulting 
from  their  negligence.  Comstoek,  C.  J.,  held  the  companies 
estopped  to  set  up  the  defense  of  ultra  vires  and  liable  on 
their  contracts.  Selden,  J.,  held  the  contract,  being  ultra 
vires,  was  void,  but  the  defendant  companies  were  liable  for 
their  negligent  torts  nevertheless. 

Comstoek,  C.  J.,  in  the  course  of  his  opinion,  said: 

"Let  us  now  concede  that  the  unauthorized  contracts  of  a 
corporation  are  illegal  in  the  sense  contended  for;  it  by  no 
means  follows  that  they  are  never  to  be  enforced.  An  agree- 
ment declared  by  statute  to  be  void  cannot  be  enforced  be- 
cause such  is  the  legislative  will;  but  when,  without  any  such 
declaration,  it  is  simply  illegal,  it  is  capable  of  enforcement 
where  justice  plainly  requires  it.  Circumstances  may,  and 
often  do,  exist  which  estop  the  offender  from  taking  advantage 
of  his  own  wrong.  The  contract  may  be  entered  into  on  the 
one  side  without  any  participation  in  the  guilt  and  without 
any  knowledge  even  of  the  vice  which  contaminates  it.  An 
innocent  person  may  part  with  value,  or  otherwise  change  his 
situation  upon  the  faith  of  the  contract.  A  railroad  corpora- 
tion, for  example,  may  purchase  iron  rails  and  give  its  obliga- 
tion to  pay  for  them,  with  a  design  to  sell  them  again  on  spec- 
ulation instead  of  using  them  for  continuing  its  track.  Such 
a  transaction  is  clearly  unauthorized,  and  is  therefore  said 
to  be  illegal.  But  if  the  corporation  is  deemed  to  make  the 
contract — in  other  words,  if,  as  I  have  above  shown,  it  is 
a  legal  possibility  for  corporations  to  make  contracts  outside 
of  their  just  powers,  how  can  its  illegality  be  set  up  against 
the  other  party  who  knows  nothing  of  the  unlawful  purpose? 
So  an  incorporated  bank  may  purcha.se  land,  having  power 
to  do  so  for  a  banking-house,  but  actually  intending  to  specu- 
late in  the  transaction.  This  is  also  ultra  vires,  but  can  the 
want  of  authoritj^  be  interposed,  in  repudiation  of  a  just 
obligation  to  pay  for  the  same  land,  the  vendor  not  being 


§  77  SUMMARY   OF   CORPORATION   LAW.  70 

in  pari  delicto?  Such  a  doctrine  is  not  only  shocking  to  the 
reason  and  conscience  of  mankind,  but  it  goes  beyond  the  law 
in  regard  to  the  illegal  contracts  of  individuals." 

§  77.  In  Whitney  Arms  Co.  v.  Barlow,  63  N.  T.  62,  it  was 
held  that  where  a  corporation  has  fully  performed  a  contract 
on  its  part  to  manufacture  and  deliver  certain  articles,  it  is  no 
defense  to  an  action  brought  to  recover  the  purchase  price 
that  the  contract  was  not  within  the  chartered  powers  of  the 
corporation.     Allen,  J.,  said: 

"The  plea  of  ultra  vires  should  not,  as  a  general  rule,  pre- 
vail, whether  interposed  for  or  against  a  corporation,  when  it 
would  not  advance  justice,  but,  on  the  contrary,  would  accom- 
plish a  legal  wrong. ' ' 

In  Woodruff  v.  Erie  Ry.  Co.,  93  N.  Y.  609,  it  was  held  that 
where  a  railroad  company  leased  its  property  and  privileges 
to  an  individual,  the  lessee  was  estopped  to  set  up  the  defense 
that  the  lease  was  ultra  vires.  (Nassau  Bank  v.  Jones,  95 
N.  Y.  123.) 

In  Bath  Gaslight  Co.  v.  Claffy,  151  N.  Y.  24,  it  was  held 
that  though  the  lease  of  all  the  property  and  franchises  of  a 
gaslight  company  was  ultra  vires,  that  constituted  no  defense 
to  an  action  for  rent.     Andrews,  C.  J.,  said: 

"But  in  not  infrequent  instances  corporations  enter  into  un- 
authorized contracts  which  are  neither  mala  in  se  nor  mala  pro- 
hibita,  or  when  the  only  prohibition  or  restriction  is  implied 
from  the  grant  of  specified  powers.  It  is  this  class  of  eases 
which  opens  the  field  of  controversy.  Is  such  a  contract  per- 
formed by  one  party,  but  not  performed  by  the  other,  void  as 
between  them  to  all  intents  and  purposes,  so  that  no  recovery 
can  be  had  under  it  against  the  party  who  has  received  the  con- 
sideration for  his  promise,  but  neglects  or  refuses  to  perform 
it,  or  is  it  so  tainted  with  illegality  that  the  courts  mast  refuse 
to  recognize  it  under  any  circumstances  or  enforce  its  obli- 
gation, whether  as  to  past  or  future  transactions?  .... 

"The  courts  in  this  state,  from  an  early  day  commencing 
as  far  back  as  the  Utica  Insurance  cases,  have  sought  to  regu- 
late and  restrict  the  defense  of  ultra  vires  so  as  to  make  it 
consistent  with  the  obligations  of  justice.  Insurance  Co.  v. 
Scott,  19  Johns.  1;  Curtis  v.  Leavitt,  15  N.  Y.  9;  Bissell  v. 
Railroad  Cos.,  22  N.  Y.  260,  opinion  of  Comstock,  C.  J.; 
Parish  v.  Wheeler,  Id.  495;  Arms  Co.  v.  Barlow,  63  N.  Y.  62; 


71  ULTRA  VIRES  TRANSACTIONS.  §  78 

Pratt  V.  Short,  79  N.  Y.  437;  Woodruff  v.  Railway  Co.,  93 

N.  Y.  609 ;  Starin  v.  Edson,  112  N.  Y.  206,  19  N.  E.  670 

The  lease  now  in  question  was  not  in  any  true  sense  of  the 
word  illegal.  It  was  undoubtedly  void  as  against  the  state. 
The  parties  to  the  lease  assumed  it  to  be  valid.  It  was  con- 
templated, as  the  provisions  of  the  lease  show,  that  the  lessee 
would  continue  and  extend  the  business  before  carried  on  by 
the  plaintiff,  and  it  is  not  suggested  that  it  did  not  during 
its  occupation  discharge  all  the  obligations  to  the  public  which 
rested  on  the  plaintiff.  The  state  has  not  intervened,  and 
the  possession  of  the  property  has  now  been  restored  to  its 
original  proprietors.  The  contract  has  been  terminated  as  to 
the  future,  and  all  that  remains  undone  is  the  payment  by 
the  lessee  of  the  unpaid  rent.  We  think  the  demands  of 
public  policy  are  fully  satisfied  by  holding  that  as  to  the 
public  the  lease  was  void,  but  that,  as  between  the  parties, 
so  long  as  the  occupation  under  the  lease  continued,  the  lessee 
was  bound  to  pay  the  rent,  and  that  its  recovery  may  be 
enforced  by  action  on  the  covenant." 

§  78.  But  in  New  York  an  ultra  vires  contract,  if  still  ex- 
ecutory, will  not  be  enforced.  (Nassau  Bank  v.  Jones,  95  N.  Y. 
115.)  In  this  case,  in  holding  that  a  bank  could  not  enforce  a 
contract  to  share  in  a  purchase  of  stock  in  a  railroad  company, 
Ruger,  C.  J.,  said : 

"While  executed  contracts  made  by  corporations  in  excess 
of  their  legal,  powers  have,  in  some  cases,  been  upheld  by 
the  courts,  and  parties  have  been  precluded  from  setting  up 
as  a  defense  to  actions  brought  by  corporations  their  want  of 
power  to  enter  into  such  contracts  (Bissel  v.  M.  S.  &  N.  I.  R. 
R.  Co.,  22  N.  Y.  258;  Whitney  Arms  Co.  v.  Barlow,  63  Id. 
62;  Woodruff  v.  E.  R.  R.  Co.,  93  Id.  618),  this  doctrine  has 
never  been  applied  to  a  mere  executory  contract  which  is 
sought  to  be  made  the  foundation  of  an  action  either  by  or 
against  such  corporations." 

In  Jamison  et  al.  v  Citizens'  Bank,  122  N.  Y.  135,  in  an 
action  to  recover  from  the  bank  for  losses  sustained  by  it  in 
dealing  through  plaintiff's  brokers  in  cotton  futures,  it  was 
held  that  the  bank  never  having  received  any  benefit  was 
entitled  to  avail  itself  of  ultra  vires  as  a  defense.  In  speak- 
ing of  the  rule  of  estoppel  to  plead  ultra  vires  to  an  executed 
contract  as  being  inapplicable  to  the  case  at  bar,  Haight,  J,, 
said; 


§  79  SUMMARY    OF    CORPORATION   LAW.  72 

**It  is  contended  that  the  defense  of  ultra  vires  is  not 
available  in  this  case,  for  the  reason  that  the  contract  had 
been  executed  on  the  part  of  the  plaintiffs,  and  that  the  de- 
fendant is  estopped  from  setting  up  the  defense.  In  the  case 
of  Arms  Co.  v.  Barlow,  63  N.  Y.  62,  the  plaintiff  was  a 
corporation  organized  for  the  purpose  of  manufacturing  every 
variety  of  firearms  and  other  implements  of  war,  and  all 
kinds  of  machinery  adapted  to  the  construction  thereof.  It 
entered  into  a  contract  with  the  American  Seal  Lock  Com- 
pany to  manufacture  and  deliver  ten  thousand  locks.  The 
locks  having  been  delivered,  it  was  held  that  the  contract  was 
fully  executed,  and  that  the  plea  of  ultra  vires  would  not 
prevail  as  a  defense  to  an  action  brought  to  recover  the  con- 
tract price.  We  do  not  question  the  rule  thus  invoked.  It 
has  been  repeatedly  declared  in  other  cases,  as,  for  instance, 
in  Parish  v.  Wheeler,  22  N.  Y.  494,  in  which  it  was  held  that 
a  railroad  company,  having  purchased  and  received  a  steam- 
boat, could  be  compelled  to  pay  for  it,  although  the  power 
to  purchase  was  not  included  in  its  charter;  but  this  doctrine 
has  no  application  to  executory  contracts  which  are  sought 
to  be  made  the  foundation  of  an  action,  or  to  contracts  that 
are  prohibited  as  against  public  policy  or  immoral." 

§  79.  In  Kadish  v.  Garden  City  etc.  Assn.,  151  111.  531,  it 
was  held  that  a  loan  made  by  a  building  and  loan  association 
to  one  for  the  benefit  of  a  corporation  was  ultra  vires ;  but  the 
transaction,  being  executed,  was  binding.     Wilkin,  J.,  said : 

"There  is,  as  above  shown,  no  prohibition  in  the  statute 
against  corporations  becoming  members  of  homestead  loan 
associations  for  the  purpose  of  borrowing  money.  Neither  is 
there  any  prohibition  therein  against  loaning  money  for 
other  than  business  purposes.  In  other  words,  the  transac- 
tions were  at  most  ultra  vires,  in  the  commonly  understood 
sense  of  those  words,  and  nothing  more All  the  de- 
cisions on  this  question  naturally  rest  upon  the  rule  'that 
where  a  party  has  accepted  and  made  his  own  the  benefit  of 
a  contract,  he  has  estopped  himself  from  denying  in  the  courts 
the  validity  of  the  instrument  by  which  these  benefits  came  to 
him.'  ....  While  a  contract  ultra  vires  remains  executory 
courts  will  interfere  to  prevent  its  enforcement,  or  on  the 
application  of  a  shareholder  or  other  authorized  person  pre- 
vent its  execution;  but  when  it  has  been  carried  into  effect 
and  the  corporation  has  received  the  benefit  of  it,  it  cannot 
plead  the  excess  of  its  power  in  discharge  of  its  liability." 


73  ULTRA  VIRES  TRANSACTIONS.  §  80 

In  Wright  v.  Hughes,  119  Ind.  324,  it  was  held  that  the 
fact  that  a  loan  made  by  a  corporation  was  ultra  vires  was 
no  defense  to  the  enforcement  of  the  mortgage  given  to 
secure  it.     ]\Iitchell,  J.,  said: 

"The  rule  is  now  too  thoroughly  established  to  be  longer 
open  to  question  that  where  a  contract  has  been  executed 
and  fully  performed  on  the  part  of  the  corporation,  or  of 
the  party  with  whom  it  contracted,  neither  will  be  permitted 
to  insist  that  the  contract  was  not  within  the  power  of  the 
corporation." 

§  80.  In  State  v.  Corning  State  Savings  Bank,  136  Iowa, 
79,  it  was  held  that  there  could  be  no  recovery  on  a  certificate 
of  deposit  prohibited  by  statute,  the  court  (Diemer,  J,),  say- 
ing: 

"If  the  contract  were  simply  ultra  vires,  the  bank  having 
received  the  benefit  thereof  would  be  estopped  to  deny  its 
liability.  Church  v.  Johnson,  93  Iowa,  54,  61  N.  W.  "916 ; 
Aldrich  v.  Bank,  176  U.  S.  618,  44  L.  ed.  611,  20  Sup.  Ct. 
Rep.  498.  But  if  the  contract  be  one  prohibited  by  law,  and 
therefore  unlawful,  then  no  recovery  may  be  had  thereon. 
In  re  Insurance  Co.,  107  Iowa,  148,  70  Am.  St.  Rep.  149, 
77  N.  W.  868 ;  Steever  v.  Railroad  Co.,  62  Iowa,  371,  17  N. 
W.  595;  Stover  v.  Flower,  supra;  Page  on  Contracts,  §§  1083, 
1084 ;  State  Bank  v.  Coquillard,  6  Ind.  232 ;  Siter  v.  Sheets, 
7  Ind.  133 ;  Bank  v.  Parsons,  21  Vt.  199 ;  Dillon  v.  Allen,  46 
Iowa,  299,  26  Am.  Rep.  145." 

In  Zinc  Carbonate  Co.  v.  First  Nat.  Bank,  103  Wis.  125, 
in  holding  that  a  corporation  could  not  shield  itself  from 
liability  to  remedy  a  wrong  by  setting  up  ultra  vires  as  a 
defense,  the  court  said: 

"If  such  a  body  transcend  its  powers,  it  commits  a  wrong 
against  the  state,  and  oi'dinarily  it  is  for  the  state  only  to 
call  it  to  account  for  such  violation.  Farwell  Co.  v.  Wolf, 
96  Wis.  10,  70  N.  W.  289,  71  N.  W.  109;  Winterfield  v. 
Brewing  Co.,  96  Wis.  239,  71  N.  W.  101 ;  McElroy  v.  Minne- 
sota Percheron  Horse  Co.,  96  Wis.  317.  71  N.  W.  652;  Hub- 
bard V.  Haley,  96  Wis.  578,  71  N.  W.  1036." 

In  Denver  Fire  Ins.  Co.  v.  McClelland,  9  Colo.  11,  a  policy 
of  insurance  ultra  vires  the  company  was  held  binding  on 
the  company  in  favor  of  the  policy-holder,  the  court  citing 
and  following  the  New  York  cases. 


§§81,82  SUMMAPwY   OF   CORPORATION   LAW.  74 

In  McQuaig  v.  Gulf  Naval  Stores  Co.  (Fla.),  47  South. 
2,  a  contract  for  commissions  for  finding  a  purchaser  for  real 
estate,  though  ultra  vires,  was  held  enforceable  against  the 
company,  Whitfield,  J.,  saying: 

"While  those  dealing  with  a  private  corporation  are 
charged  with  some  degree  of  care  to  ascertain  the  powers  of 
the  corporation  with  reference  to  the  transaction,  if  the  trans- 
action has  some  fair  relation  to  the  matters  within  the  cor- 
porate authority,  the  defense  of  ultra  vires  will  not,  in  gen- 
eral, be  available  to  afford  injustice  or  imposition," 

§  81.  In  Carson  City  Sav.  Bank  v.  Carson  City  Elevator 
Co.,  90  Mich.  550,  where  the  articles  of  the  corporation  included 
"buying  and  selling  of  grain  and  other  commodities,"  it  was 
held  that  the  corporation  was  liable  on  notes  given  for  grain, 
whether  the  statute  under  which  the  corporation  was  formed 
permitted  such  a  purpose  or  not,  Morse,  C.  J.,  saying : 

"The  plea  of  ultra  vires  should  not,  as  a  general  rule, 
prevail,  whether  interposed  for  or  against  a  corporation, 
where  it  would  not  advance  justice  but,  on  the  contrary,  would 
accomplish  a  legal  wrong." 

In  Central  Bldg.  &  Loan  Assn.  v.  Lampson,  60  Minn.  422, 
the  plea  of  ultra  vires  was  held  no  defense  to  the  recovery  of  a 
loan  made  by  the  corporation  to  the  defendant  on  the  ground 
that  the  plea  would  not  be  allowed  in  the  case  of  an  executed 
contract  where  it  works  injustice. 

Similarly,  Union  Hardware  Co.  v.  Mfg.  Co.,  58  Conn.  219 ; 
Third  Avenue  Sav.  Bank  v.  Dimock,  24  N.  J.  Eq.  26 ;  Camden 
&  A.  R.  Co.  V.  May's  Landing  etc.  R.  Co.,  48  N.  J.  L.  530; 
Wright  V.  Pipe  Line  Co.,  101  Pa.  204;  Burke  etc.  Co.  v. 
Wells-Fargo  &  Co.,  7  Idaho,  42. 

§  82.  The  weight  of  authority  of  the  state  courts,  however, 
supports  the  strict  rule  recognizing  ultra  vires  as  a  defense  not 
estopped  by  performance,  as  appears  from  the  following: 

In  Davis  v.  Old  Colony  R.  R.,  131  Mass.  258,  it  was  held 
that  no  action  could  be  maintained  on  an  ultra  vires  guar- 
anty, though  acted  upon  at  great  outlay.  Gray,  C.  J.,  fully 
discussing  the  English  and  United  States  supreme  court 
cases,  said: 


75  XJLTILV  VIRES  TRANSACTIONS.  §  83 

"A  corporation  has  power  to  do  such  business  only  as  it 
is  authorized  by  its  act  of  incorporation  to  do,  and  no  other. 
It  is  not  held  out  by  the  government  nor  by  the  stockholders 
as  authorized  to  make  contracts  which  are  beyond  the  pur- 
poses and  scope  of  its  charter.  It  is  not  vested  with  all  the 
capacities  of  a  natural  person  or  of  an  ordinary  partnership, 
but  with  such  only  as  its  charter  confers.  If  it  exceeds  its 
charter  powers,  not  only  may  the  government  take  away  its 
charter,  but  those  who  have  subscribed  to  its  stock  may  avoid 
any  contract  made  by  the  corporation  in  clear  excess  of  its 
powers.  If  it  makes  a  contract  manifestly  beyond  the  powers 
conferred  by  its  charter,  and  therefore  unlawful,  a  court  of 
chancery,  on  the  application  of  a  stockholder,  will  restrain 
the  corporation  from  carrying  out  its  contract ;  and  a  court 
of  common  law  will  sustain  no  action  on  the  contract  against 
the  corporation. 

"Every  person  who  enters  into  a  contract  with  a  corpora- 
tion is  bound,  at  his  peril,  to  take  notice  of  the  legal  limits  of 
its  capacity,  especially  where,  as  in  this  commonwealth,  all 
acts  of  incorporation  are  deemed  public  acts,  and  every  cor- 
poration organized  under  general  laws  is  required  to  file  in 
the  office  of  the  secretary  of  the  commonwealth  a  certificate 
showing  the  purpose  for  which  the  corporation  is  constituted. 
Gen.  Stats.,  c.  3,  §  5;  Stats.  1870,  c.  224,  §§  7,  11;  Whitenton 
Mills  V.  Upton,  10  Gray,  582,  598 ;  Richardson  v.  Sibley,  11 
Allen,  65,  72;  Pearce  v.  Madison  &  Indianapolis  R.  R.,  21 
How.  441,  443;  East  Anglian  Rys.  v.  Eastern  Counties  Ry., 
11  C.  B.  775,  811;  Ashbury  Ry.  Carriage  &  Tran.  Co.  v. 
Riche,  L.  R.  7  H.  L.  653. 

"There  is  a  clear  distinction,  as  was  pointed  out  by  Mr. 
Justice  Campbell  in  Zabriskie  v.  Cleveland,  C.  &  C.  R.  R.,  23 
How.  381,  398,  by  Mr.  Justice  Hoar  in  Monument  Bank  v. 
Globe  Works,  101  Mass.  57,  58,  and  by  Lord  Chancellor 
Cairns  and  Lord  Hatherly  in  Ashbury  Ry.  Carriage  &  Tran. 
Co.  V.  Riche,  L.  R.  7  H.  L.  668,  684,  between  the  exercise 
by  a  corporation  of  a  power  not  conferred  upon  it,  varying 
from  the  objects  of  its  creation  as  declared  in  the  law  of  its 
organization,  of  which  all  persons  dealing  with  it  are  bound 
to  take  notice,  and  the  abuse  of  a  general  power,  or  the  fail- 
are  to  comply  with  prescribed  formalities  or  regulations,  in 
a  particular  instance,  where  such  abuse  or  failure  is  not 
Imown  to  the  other  contracting  party." 

§  83.  In  Buckeye  Marble  &  Freestone  Co.  v.  Harvey,  92 
Tenn.  115,  it  was  held  that  the  sale  of  stock  to  a  foreign  cor- 
poration was  ultra  vires,  and  that  the  defendant  president  of 


§  84  SUMMARY   OF   CORPORATION   LAW.  76 

the  domestic  corporation,  though  he  had  received  the  benefit  of 
the  contract  for  such  sale,  was  nevertheless,  when  sued  on  the 
contract,  entitled  to  set  up  the  defense  of  ultra  vires.  Lurton, 
J.,  said: 

"The  passage  cited  by  counsel  from  Railway  Co.  v.  Mc- 
Carthy, 96  U.  S.  267,  'that  the  doctrine  of  ultra  vires,  when 
invoked  for  or  against  a  corporation,  should  not  be  allowed 
to  prevail  when  it  would  defeat  the  ends  of  justice  or  work  a 
legal  wrong,'  is  misleading,  and  if  literally  construed,  would 
result  in  an  erroneous  practical  extension  of  the  powers  of 
corporations.  We  do  not  understand  that  a  result  required 
by  adherence  to  the  law  would  be  either  unjust  or  a  legal 
wrong.  The  learned  judge  doubtless  intended  to  be  under- 
stood that  the  defense  would  be  a  legal  wrong  only  when  the 
law  did  not  require  its  consideration  by  the  court." 

In  Metropolitan  Stock  Exch.  v.  Lyndonville  Nat.  Bank,  76 
Vt.  303,  it  was  held,  citing  the  United  States  supreme  court 
cases,  that  a  corporation  could  not  be  estopped  from  mal\ing 
the  defense  of  ultra  vires. 
^  In  Washington  Mill  Co.  v.  Sprague  Lumber  Co.,  19  Washy/ 
165,  it  was  held  that  the  corporation  had  no  power  to  mort- 
gage its  property  to  secure  the  individual  debt  of  one  of  its 
stockholders,  and  such  mortgage  w^as  void  as  to  creditors, 
though  assented  to  by  all  the  stockholders. 

§  84.  In  Franklin  Co.  v.  Lewiston  Savings  Bank,  62  Me.  43, 
it  was  held  that  the  savings  bank  had  no  power  to  subscribe 
for  stock  in  another  corporation,  and  that  notes  given  by  the 
bank  upon  such  a  subscription  were  void  as  ultra  vires,  and 
that  though  acted  upon,  the  bank  was  not  estopped  from  set- 
ting up  ultra  vires  as  a  defense,  and  that  the  bank  having 
received  no  benefit,  no  recovery  on  a  quantum  meruit  against 
the  bank  could  be  had.     Walton,  J.,  said : 

"And  with  respect  to  such  acts  and  contracts,  it  has  been 
very  aptly  said  that  the  powers  and  franchises  of  corpora- 
tions are  grants  from  the  government;  that  it  would  be  just 
as  reasonable  and  just  as  legal  to  allow  one  who  has  a  patent 
for  one  hundred  acres  of  land  to  take  possession  of  two  hun- 
dred acres  as  to  allow  a  corporation  to  usurp  and  exercise 
a  power  not  conveyed  to  it  in  its  charter." 


77  ULTRA  VIRES  TRANSACTIONS.  §  85 

In  Hood  V.  New  York  &  New  Haven  R.  R.,  22  Conn.  501, 
it  was  held  that  the  plaintiff,  though  he  had  paid  the  con- 
sideration, could  not  enforce  a  contract  ultra  vires  and  beyond 
the  corporate  powers  of  the  defendant  to  make,  and  that  the 
defendants  were  not  estopped  from  setting  up  the  defense. 
Ellsworth,  J.,  said : 

"We  place  our  judgment  upon  a  plain  principle  of  equity 
and  law,  viz.,  that  these  defendants  are  not  bound  by  a  con- 
tract they  had  no  power  to  make,  and  are  not  estopped  setting 
up  this  matter  in  defense." 

§  85.  In  Miners'  Ditch  Co.- v.  Zellcrbach,  37  Cal.  543,  it 
was  held  that  in  a  contract  between  a  corporation  and  parties 
other  than  stockholders,  when  the  act  in  question  is  one  which 
the  corporation  has  no  power  to  perform  under  any  circum- 
stances, the  corporation  may  in  any  case  avail  itself  of  the 
defense  of  ultra  vires;  but  when  the  act  in  question  may  be 
performed  by  the  corporation  for  some  purposes  but  not  for 
others,  then,  though  the  act  be  ultra  vires  in  fact,  the  cor- 
poration may  be  estopped  by  the  circumstances  of  the  par- 
ticular case  from  setting  up  the  defense,  and  further  cor- 
porate acts  are  presumed  to  be  within  the  corporate  powers 
until  the  contrary  is  established. 

In  Portland  Lumbering  &  Mfg.  Co.  v.  City  of  Portland, 
18  Or.  21,  in  an  action  to  recover  for  materials  furnished  the 
city  used  in  making  a  street  improvement,  it  was  held  that 
ultra  vires  was  not  a  defense  where  the  power  existed  but 
there  was  a  departure  from  the  strict  requirement  of  the 
law  in  its  exercise. 

In  Re  Assignment  of  P.  H.  Co.,  24  Or.  330,  it  was  held 
that  the  claim  of  a  creditor  of  the  insolvent  company  for  lime 
sold  the  company  was  valid,  though  dealing  in  lime  was 
ultra  vires  the  company,  the  latter  having  had  the  lime  and 
therefore  being  in  justice  bound  to  pay  for  it.  It  does  not 
appear  whether  the  claim  was  allowed  on  the  basis  of  the 
contract  price  or  on  a  quantum  meruit.  So  far  as  the  opinion 
of  the  court  goes,  the  decision  is  consistent  with  the  Massa- 
chusetts and  United  States  supreme  court  rule. 


§  86  SUMMARY   OP   CORPORATION  LAW.  78 

In  Chewacla  Lime  Works  v.  Dismukes,  87  Ala.  344,  it  was 
held  that  "The  established  rule  in  this  state  is  that  a  cor- 
poration is  not  estopped,  by  reason  of  having  received  the 
benefits  of  a  contract  which  is  ultra  vires,  from  setting  up 
its  invalidity  in  defense  of  a  suit  brought  to  enforce  it." 

Strict  rule  of  United  States  supreme  court  folloAved  in 
White  V.  Bank,  22  Pick.  181;  Morville  v.  Society,  25  Am. 
Rep.  40;  Davis  v.  Railroad  Co.,  41  Am.  Rep.  221;  Paul  v. 
Kenasha,  94  Am.  Dec.  598;  Moore  v.  Tanning  Co.,  60  Vt.  459; 
Anthony  v.  Sewing  Mach.  Co.,  16  R.  I.  571 ;  Harriman  v. 
First  etc.  Church,  66  Ga.  186;  Day  v.  Buggy  Co.,  57  Mich. 
146. 

i§  86.  Where,  however,  the  power  is  existent  by  the  terms  of 
the  charter  but  has  been  exceeded  or  otherwise  abused  without 
practicable  means  of  ascertainment  by  one  dealing  with  the 
corporation,  it  is  generally  agreed  that  the  party  at  fault 
may  be  estopped  from  setting  up  the  abuse  or  ultra  vires 
act.  (National  Bank  v.  Case,  99  U.  S.  628 ;  Ossipee  Hosiery 
&  Woolen  Mfg.  Co.  v.  Canney,  54  N.  H.  295 ;  Prescott  Nat. 
Bank  v.  Butler,  157  Mass.  548;  National  Bank  v.  Whitney, 
103  U.  S.  99 ;  Humphrey  v.  Patrons  Mercantile  Assn.,  50  Iowa, 
607;  Little  v.  O'Brien,  9  Mass.  423.) 

The  law  presumes  the  corporation  to  be  acting  within  its 
corporate  powers  until  the  contrary  is  proved.  (Louisville 
etc.  Ry.  Co.  v.  Louisville  Trust  Co.,  174  U.  S.  552;  Inter- 
national Bldg.  etc.  Assn.  v.  Wall,  153  Ind.  554  j  Thomp.  Corp., 
§  2779.) 


79  CORPORATE  CRIMES  AND  TORTS.  §  90 


CHAPTER  V. 

CORPORATE  CRIMES  AND  TORTS. 

§  90.  Just  as  a  contract  of  a  corporation  ultra  vires  its 
charter  powers  is  a  nullity  as  creating  no  valid  contractual  ob- 
ligation, so  a  corporate  authority,  express  or  implied ,  to  do  a 
public  or  private  wrong  recognized  as  a  crime  or  a  tort  is  a 
nullity  as  conferring  no  valid  authority  so  to  do;  nevertheless 
it  is  true  that  such  corporate  action  if  it  does  occur  is  not  right- 
ful but  wrongful,  and  therefore  if  because  of,  and  pursuant  to, 
such  wrongful  action  an  agent  or  agents  of  the  corporation 
commits  the  wrong  to  the  public  or  individual,  the  corporation 
is  responsible,  and  is  held  liable  for  the  crime  or  tort  as  the 
case  may  be.  In  the  case  of  torts,  the  corporation  is  answer- 
able in  damages ;  in  the  case  of  crimes,  the  corporation  may  be 
fined,  its  property  sequestered  or  its  charter  forfeited. 

In  National  Bank  v.  Graham,  100  U.  S.  699,  in  holding  a 
national  bank  liable  in  damages  occasioned  by  its  gross  negli- 
gence in  losing  a  special  deposit  which  it  received  ultra  vires 
its  charter,  Swayne,  J.,  said  (p.  702)  : 

"Corporations  are  liable  for  every  wrong  they  commit,  and 
in  such  cases  the  doctrine  of  ultra  vires  has  no  application. 

"They  are  also  liable  for  the  acts  of  their  servants  while 
such  servants  are  engaged  in  the  business  of  their  principal, 
in  the  same  manner  and  to  the  same  extent  that  individuals  are 
liable  under  like  circumstances.  Merchants'  Bank  v.  State 
Bank,  10  Wall.  604.  An  action  may  be  maintained  against  a 
corporation  for  its  malicious  or  negligent  torts,  however 
foreign  they  may  be  to  the  object  of  its  creation  or  beyond  its 
granted  powers.  It  may  be  sued  for  assault  and  battery,  for 
fraud  and  deceit,  for  false  imprisonment,  for  malicious  prose- 
cution, for  nuisance  and  for  libel.  In  certain  cases  it  may  be 
indicted  for  misfeasance  or  nonfeasance  touching  duties  im- 
posed upon  it  in  which  the  public  are  interested.  Its  offenses 
may  be  such  as  will  forfeit  its  existence.  Philadelphia,  Wil- 
mington &  Baltimore  R.  R.  Co.  v.  Quigley,  21  How.  209;  2 
Wait  on  Actions  and  Defenses,  pp.  337-339 ;  Angell  &  Ames 
on  Corporations,  sees.  186,  385;  Cooley  on  Torts,  pp.  119, 
120." 


§§  91,  92  SUMMARY   OF   CORPORATION  LAW.  80 

MONOPOLIES,  TRUSTS  AND  RESTRAINTS  OF  TRADE. 

§  91.  The  derivative  meaning  and  as  weU  the  common,  ordi- 
nary significance  of  the  term  "monopoly"  is  sole  possession  of 
wealth.  At  the  common  law  it  came  to  be  applied  specifically 
to  designate  the  exclusive  control  of  the  manufacture  or 
sale  of  some  product  or  commodity,  and  as  incidental  to  this 
the  term  is  frequently  used  in  a  secondary  sense  or  signifi- 
cance to  denote  the  elimination  of  competition  in  production 
or  distribution,  manufacture,  trade  or  commerce. 

In  these  different  cognate  senses  it  is  applied  to  denote 
all  sorts  of  combinations  and  contracts  having  for  their  pur- 
pose the  control  of  wealth  and  its  production  and  distribution, 
particularly  restrictions  of  competi-tion,  usually  termed  re- 
straints of  trade. 

The  term  "trust"  originated  in  the  particular  form  of 
combination  attempted  by  corporations  by  placing  the  entire 
stock  of  several  corporations  in  a  single  trustee  or  trustees, 
with  full  power  to  manage  the  several  corporations  thus 
united ;  e.  g..  People  v.  North  River  Sugar  Refining  Co.,  121 
N.  Y.  582.  From  this  the  term  "trust"  came  to  be  applied 
to  all  sorts  of  large  corporations  or  combinations  whose 
apparent  tendency  is  to  control  the  manufacture  or  sale  of  a 
particular  product  or  commodity. 

At  common  law,  contracts  having  for  their  purpose  the  re- 
striction of  competition,  and  thus  being  in  restraint  of  trade, 
are  held  void  and  unenforceable  as  being  contrary  to  public 
policy,  excepting,  however,  certain  contracts  partially  restrict- 
ing competition  to  the  extent  reasonably  necessary  to  protect 
the  main  object  of  the  contract  in  question,  e.  g..  in  the  case 
of  the  sale  of  a  business,  the  vendor  agreeing  not  to  compete 
within  certain  localities  for  a  certain  period  of  time,  such 
agreements,  though  restricting  competition  and  in  restraint 
of  trade  strictly,  being  held  not  to  be  contrary  to  public 
policy  where  reasonably  necessary. 

§  92.  In  Oregon  Steam  Navigation  Co.  v.  Winsor  (1873), 
20  Wall.  (U.  S.)  64,  an  agreement  made,  on  the  sale  of  a 
steamer,  that  it  should  not  be  employed  for  ten  years  in  Cali- 


81  CORPORATE  CRIMES  AND  TORTS.  §  92 

fornia  waters  was  held  not  to  be  in  restraint  of  trade,  and 
valid.     Bradley,  J.,  said : 

"It  is  a  well-settled  rule  of  law  that  an  agreement  in  gen- 
eral restraint  of  trade  is  illegal  and  void;  but  an  agreement 
which  operates  merely  in  partial  restraint  of  trade  is  good, 
provided  it  be  not  unreasonable  and  there  be  a  consideration 
to  support  it.  In  order  that  it  may  not  be  unreasonable,  the 
restraint  imposed  must  not  be  larger  than  is  required  for  the 
necessary  protection  of  the  party  Avith  whom  the  contract  is 
made.  A  contract,  even  on  good  consideration,  not  to  use  a 
trade  anywhere  in  England,  is  held  void  in  that  country  as 
being  too  general  a  restraint  of  trade;  but  a  contract  not  to 
use  a  trade  at  a  particular  place,  if  it  be  founded  on  a  good 
consideration  and  be  made  for  a  proper  and  useful  purpose, 
is  valid.  Of  course,  a  contract  not  to  exercise  a  trade  gener- 
ally would  be  obnoxious  to  the  rule,  and  would  be  void 

There  are  two  principal  grounds  on  Avhich  the  doctrine  is 
founded  that  a  contract  in  restraint  of  trade  is  against  public 
policy.  One  is  the  injury  to  the  public  by  being  deprived  of 
the  restricted  party's  industry;  the  other  is  the  injury  to  the 
party  himself  by  being  precluded  from  pursuing  his  occupa- 
tion, and  thus  being  prevented  from  supporting  himself  and 
his  family.  It  is  evident  that  both  these  evils  occur  when 
the  contract  is  general- — not  to  pursue  one's  trade  at  all,  or 
not  to  pursue  it  in  the  entire  realm  or  country.  The  country 
suffers  the  loss  in  both  cases;  and  the  party  is  deprived  of  his 
occupation,  or  is  obliged  to  expatriate  himself  in  order  to 
follow  it.  A  contract  that  is  open  to  such  grave  objection  is 
clearly  against  public  policy.  But  if  neither  of  these  evils 
ensue,  and  if  the  contract  is  founded  on  a  valid  consideration 
and  a  reasonable  ground  of  benefit  to  the  other,  it  is  free  from 
objection,  and  may  be  enforced. 

"In  accordance  with  these  principles  it  is  well  settled  that 
a  stipulation  by  a  vendee  of  any  trade,  business  or  establish- 
ment that  the  vendor  shall  not  exercise  the  same  trade  or 
business  or  erect  a  similar  establishment  within  a  reasonable 
distance,  so  as  not  to  interfere  with  the  value  of  the  trade, 
business  or  thing  purchased,  is  reasonable  and  valid.  In  like 
manner  a  stipulation  by  the  vendor  of  an  article  to  be  used 
in  a  business  or  trade  in  which  he  is  himself  engaged  that  it 
shall  not  be  used  within  a  reasonable  region  or  distance,  so  as 
not  to  interfere  with  his  said  business  or  trade,  is  also  valid 
and  binding." 
6 


§  93  SUMMARY   OF   CORPORATION   LAW.  82 

§  93.  In  Fowle  v.  Park,  131  U.  S.  88,  a  contract,  whereby 
the  sale  of  a  patent  medicine  by  one  of  the  parties  was  pro- 
hibited in  certain  states  and  territory,  was  held  valid. 

In  Gibbs  v.  Baltimore  Gas  Co.,  130  U.  S.  396,  an  agreement 
between  two  gas  companies  for  the  regulation  of  rates,  and 
whereby  one  should  cease  laying  pipes  in  violation  of  the 
state  statute,  was  held  unenforceable. 

In  Chicago  &  R.  R.  Co.  v.  Pullman  Car  Co.  (1890),  139 
U.  S.  79,  Harlan,  J,,  held  an  agreement  giving  the  Pullman 
company  the  exclusive  right  to  run  its  cars  over  the  railroad 
company's  lines  was  not  in  restraint  of  trade  at  common  law. 

In  Carter  v.  Ailing,  43  Fed.  208,  an  agreement  by  a  trav- 
eling salesman  not  to  enter  employment  of  a  competitor  for 
a  period  of  three  years  was  held  valid. 

In  Durber  Co.  v.  Howard  Co.,  66  Fed.  643,  an  agreement 
among  several  not  to  buy  watch-cases  of  plaintiff  was  held 
only  a  partial  restraint  of  trade  and  not  invalid. 

In  American  Strawboard  Co.  v.  Haldeman  Paper  Co.,  83 
Fed.  619,  an  agreement  by  a  lessee  of  a  paper-mill  not  to 
manufacture  certain  classes  of  paper  for  a  period  of  years 
was  held  valid. 

In  Fisheries  Co.  v.  Lennen,  116  Fed.  217  and  130  Fed.  533, 
an  agreement  by  sellers  of  property  not  to  deal  in  certain 
fish  on  the  Atlantic  seaboard  for  a  period  of  years  was  held 
valid. 

In  Harrison  v.  Glucose  Sugar  Ref.  Co.,  116  Fed.  304,  a 
stipulation  in  a  contract  of  employment,  whereby  the  em- 
ployee covenanted  not  to  be  interested  in  the  same  business 
for  the  period  of  the  contract  within  fifteen  hundred  miles 
of  Chicago  except  under  the  contract,  was  held  valid. 

In  National  Enameling  &  Stamping  Co.  v.  Haberman,  120 
Fed.  415,  a  general  restrictive  covenant,  unlimited  as  to  time 
and  covering  the  entire  United  States,  was  held  valid. 

In  A.  Booth  &  Co.  v.  Davis,  127  Fed.  875,  a  covenant  by 
stockholders  of  a  company  which  sold  its  business  not  to  en- 
gage in  the  same  business  in  the  same  or  adjacent  territory 
for  ten  years  was  held  valid. 

In  Robinson  v.  Suburban  Brick  Co.,  127  Fed.  804,  a  cove- 
nant in  a  contract  by  which  owners  of  a  brick  plant  conveyed 


83  CORPORATE  CRIMES  AND  TORTS.  §  94 

it  to  a  corporation,  agreeing  not  to  engage  in  competing  busi- 
ness within  fifty  miles  for  ten  years,  was  held  valid. 

§  94.  In  United  States  v.  Addyston  Pipe  &  Steel  Co.,  85 
Fed.  271,  in  holding  that  a  restrictive  covenant,  to  be  upheld, 
whether  it  be  in  partial  or  general  restraint  of  trade,  must  be 
ancillary  to  a  lawful  contract,  and  where  the  main  contract 
was  in  restraint  of  trade,  it  is  in  violation  of  the  Sherman 
Act  of  1890,  Taft,  J.,  said: 

"For  the  reasons  given,  then,  covenants!  in  partial  restraint 
of  trade  are  generally  upheld  as  valid  when  they  are  agree- 
ments (1)  by  the  seller  of  property  or  business  not  to  com- 
pete with  the  buyer  in  such  a  way  as  to  derogate  from  the 
value  of  the  property  or  business  sold;  (2)  by  a  retiring 
partner  not  to  compete  with  the  firm;  (3)  by  a  partner  pend- 
ing the  partnership  not  to  do  anything  to  interfere,  by  com- 
petition or  otherwise,  with  the  business  of  the  firm;  (4)  by 
the  buyer  of  property  not  to  use  the  same  in  competition  with 
the  business  retained  by  the  seller;  and  (5)  by  an  assistant 
servant  or  agent  not  to  compete  with  his  master  or  employer 
after  the  expiration  of  his  time  of  service.  Before  such  agree- 
ments are  upheld,  however,  the  court  must  find  that  the  re- 
straints attempted  thereby  are  reasonably  necessary  (1,  2 
and  3)  to  the  enjoyment  by  the  buyer  of  the  property,  good- 
will or  interest  in  the  partnership  bought;  or  (4)  to  the 
legitimate  ends  of  the  existing  partnership;  or  (5)  to  the 
prevention  of  possible  injury  to  the  business  of  the  seller  from 
use  by  the  buyer  of  the  thing  sold;  or  (6)  to  protection  from 
the  danger  of  loss  to  the  employer's  business,  caused  by  the 
unjust  use  on  the  part  of  the  employee  of  the  confidential 
knowledge  acquired  in  such  business.  Under  the  first  class 
come  the  cases  of  Mitchell  v.  Revnolds,  1  P.  Wms.  181; 
Fowle  V.  Parke,  131  U.  S.  88,  9  Sup.  Ct.  658;  Nordenfeldt 
V.  Maxim  Nordenfeldt  Co.  (1894),  App.  Cas.  534;  Rousillon 
V.  Rousillon,  14  Ch.  Div.  351;  Cloth  Co.  v.  Lorsont,  L.  R. 
9  Eq.  345;  Whittaker  v.  Howe,  3  Beav.  383;  Match  Co.  v. 
Roeber,  106  N.  Y.  473,  13  N.  E.  419;  Tode  v.  Gross,  127 
N.  Y.  480,  28  N.  E.  469;  Beal  v.  Chase,  31  Mich.  490;  Hub- 
bard v.  Miller,  27  Mich.  15;  National  Ben.  Co.  v.  Union 
Hospital  Co.,  45  Minn.  272,  47  N.  W.  806 ;  Whitney  v.  Slay- 
ton,  40  Me.  224;  Pierce  v.  Fuller,  8  Mass.  222;  Richards  v. 
Seating  Co.,  87  Wis.  503,  58  N.  W.  787.  In  the  second  class 
are  Tallis  v.  Tallis,  1  El.  &  Bl.  391,  and  Lange  v.  Werk,  2 
Ohio  St.  520.     In  the  third  class  are  Machinery  Co.  v.  Dolph, 


§  95  SUMMARY   OP    CORPORATION   LAW.  84 

138  tr.  S.  617,  11  Sup.  Ct.  412,  Id.  28  Fed.  553,  and  Matthews 
V.  Associated  Press,  136  N.  Y.  333,  32  N.  E.  981.  In  the 
fourth  class  are  American  Strawboard  Co.  v.  Haldeman  Paper 
Co.,  83  Fed.  619,  and  Hitchcock  v.  Anthony,  Id.  779,  both 
decisions  of  this  court;  Navigation  Co.  v.  Winsor,  20  Wall. 
64 ;  Dunlop  V.  Gregory,  10  N.  Y.  241 ;  Hodge  v.  Sloan,  107 
N.  Y.  244,  17  N.  E.  335.  While  in  the  fifth  class  are  the 
cases  of  Homer  v.  Ashford,  3  Bing.  322;  Horner  v.  Graves, 
7  Bing.  735 ;  Hitchcock  v.  Coker,  6  Adol.  &  E.  454 ;  Ward  v. 
Byrne,  5  Mees.  &  W.  547;  Dubowski  v.  Goldstein  (1896),  1 
Q^  B.  478;  Peels  v.  Saalfeld  (1892),  2  Ch.  149;  Taylor  v. 
Blanchard,  13  Allen,  370;  Keeler  v.  Taylor,  53  Pa.  St.  467; 
Herreshoff  v.  Boutineau,  17  R.  I.  3,  19  Atl.  712." 

§  95.  In  Gamewell  Fire  Alarm  Tel.  Co.  v.  Crane  (Mass. 
1893),  35  N.  E.  98,  a  covenant  by  a  manufacturer  of  fire-alarm 
apparatus  made  on  the  sale  of  his  plant  and  stock  not  to  enter 
into  competition  with  the  purchaser  for  ten  years  was  held 
void,  as  being  unrestricted  as  to  place. 

In  Hurren  v.  Gavin  (111.  1896),  44  N.  E.  735,  a  covenant 
made  by  seller  of  an  undertaking  business  not  to  engage  in 
the  business  in  the  city  for  five  years  was  held  not  to  be  in- 
valid as  being  in  restraint  of  trade. 

In  Anchor  Electric  Co.  v.  Hawkes  (Mass.  1898),  50  N.  E. 
509,  a  covenant  made  by  officers  of  corporations  manufactur- 
ing and  dealing  in  electric  goods,  on  the  sale  of  the  business 
to  a  new  corporation,  in  which  they  became  officers,  not  to 
engage  in  competition  for  five  years  was  held  valid,  the  Crane 
case  being  distinguished  on  the  ground  that  there  the  re- 
strictive covenant  was  not  incidental. 

In  Trentman  v.  Wahrenburg  (Ind.  1903),  65  N.  E.  1057, 
an  agreement  by  a  dealer  in  building  materials,  on  selling 
out  the  business,  to  refrain  from  engaging  therein  for  a 
period  of  five  years  wdthin  a  specified  county  was  held  valid, 
the  limitation  as  to  time  and  the  restriction  as  to  place  being 
reasonable. 

In  Palmer  v.  Toms  (Wis.  1897),  71  N.  W.  654,  a  covenant 
by  the  seller  of  a  livery  business  not  to  engage  in  that  busi- 
ness in  the  same  city  for  five  years  was  held  valid. 

In  Swigert  &  Howard  v.  Tilden  (Iowa,  1903),  97  N.  W.  82, 
a  covenant  by  a  seller  of  mail  order  shirt  business  not  to 


85  CORPORATE  CRIMES  AND  TORTS.  §  96 

engage  or  lend  his  assistance  in  the  manufacture  of  shirts 
within  one  hundred  miles  of  Des  Moines,  Iowa,  nor  engage 
in  selling  shirts  made  to  order  for  ten  years  in  Iowa  and 
Nebraska,  was  held  valid. 

In  Moore  &  Handley  Hardware  Co.  v.  Towers  Hardware 
Co.  (Ala.  1889),  6  South.  41,  where  one  of  two  competing 
firms  sold  out  to  the  other,  an  agreement  by  those  selling  not 
to  handle  goods  in  competition  with  the  buyers  in  a  specified 
territory  was  held  valid,  but  not  binding  on  a  corporation 
afterward  formed  in  which  the  sellers  were  stockholders. 

In  Cowan  v.  Fairbrother  (N.  C.  1896),  24  S.  E.  212,  a 
covenant  by  a  seller  of  a  newspaper  not  to  edit  or  print  a 
newspaper  within  a  certain  locality  was  held  valid. 

In  Tardy  v.  Creasy  (1886),  81  Va.  553,  a  covenant,  on 
sale  of  land,  restricting  all  sorts  of  business  thereon,  was  held 
invalid  as  in  restraint  of  trade. 

In  Monongahela  Coal  Co.  v.  Jutte,  210  Pa.  288,  it  was  held 
that  a  contract,  one  of  several,  made  by  a  coal  combination 
with  an  individual  selling  his  mines,  etc.,  to  the  coal  com- 
pany, whereby  he  agreed  not  to  engage,  directly  or  indi- 
rectly, in  the  mining  of  coal  for  ten  years  within  territory 
traversed  by  certain  rivers  and  covering  several  states,  was 
in  violation  of  the  federal  anti-trust  act. 

§  96.  In  Davis  v.  A.  Booth  &  Co.,  131  Fed.  31,  it  was  held 
that  a  restrictive  covenant  ancillary  to  sale  of  business  was  not 
invalidated  by  the  federal  anti-trust  act.  To  same  effect, 
Robinson  v.  Suburban  Brick  Co.,  127  Fed.  804-  Walsh  v. 
Dwight,  40  App.  Div.  (N.  Y.)  513;  Britt  v.  Ebel,  29  App. 
Div.  256;  Bancroft  v.  Union  Embossing  Co.,  72  N.  H.  402; 
Phillips  V.  lola  Cement  Co.,  125  Fed.  593.  And  in  Cincin- 
nati, P.  B.  S.  &  P.  Packet  Co.  v.  Bay  (1906),  200  U.  S. 
179,  it  was  held  that  a  contract  for  the  sale  of  vessels  engaged 
in  interstate  commerce  is  not  invalidated  by  an  agreement 
of  the  vendors  to  withdraw  from  business  for  a  specified  time. 

It  has  also  been  generally  held  that  similar  restrictive  cove- 
nants ancillary  to  contracts  for  sale  of  business  are  not  in 
violation  of  state  anti-trust  laws  (Walsh  v.  Dwight,  40  App. 
Div.  513;  Espenson  v.  Koepke,  93  Minn.  278;  Downing  v. 


§§  97-99  SUMMARY  OP  CORPORATION  LAW.  86 

Lewis,  56  Neb.  386;  Queen  Ins.  Co.  v.  State,  86  Tex.  250; 
Gates  V.  Hooper,  90  Tex.  563)  ;  but  where  the  main  contract 
is  restrictive  of  trade,  it  is  void.  (Merchants'  Ad-Sign  Co. 
V.  Sterling,  124  Cal.  429;  Bingham  v.  Brands,  119  Mich.  255; 
Texas  &  P.  Coal  Co.  v.  Lawson,  89  Tex.  394.) 

§  97.  Contracts  giving  exclusive  right  to  handle  goods  in  a 
particular  locality  are  generally  held  valid.  (Central  Shade 
Eoller  Co.  v.  Cushman,  143  Mass.  353;  State  v.  St.  Paul 
Ga.s  Light  Co.,  92  Minn.  467 ;  Over  v.  Byram  Foundry  Co., 
37  Ind.  App.  452 ;  Heimbuecher  v.  Goff,  Horner  &  Co.,  119  111. 
App.  373 ;  Schwalm  v.  Holmes,  49  Cal.  665  ;  Standard  Fireproof- 
ing  Co.  V.  St.  Louis  Fireproofmg  Co.,  177  Mo.  559 ;  Woods  v. 
Hart,  50  Neb.  497 ;  Clark  v.  Crosby,  37  Vt.  188 ;  Roller  v.  Ott, 
14  Kan.  609 ;  Keith  v.  Herschberg  Optical  Co.,  48  Ark.  138 ; 
Hauck  V.  Wright,  77  Miss.  476 ;  Welch  v.  Phelps  etc.  Mill  Co., 

89  Tex.  653.)  But  where  the  contract  is  with  one  acquiring  a 
monopoly,  and  for  the  furtherance  of  such  monopoly,  it  is  void. 
(Detroit  Salt  Co.  v.  National  Salt  Co.,  134  Mich.  103;  Texas 
V.  Brewing  Co.,  90  Tex.  277;  Fuqua  v.  Pabst  Brewing  Co., 

90  Tex.  298;  Simmons  v.  Terry  (Tex.  Civ.  App.),  79  S.  W. 
1103.) 

§  98.  An  agreement  restricting  the  class  of  persons  to  whom 
goods  shall  be  sold  and  from  whom  they  shall  be  bought  is 
generally  invalid.  (Montague  &  Co.  v.  Lowry,  193  U.  S.  38; 
Loder  v.  Jayne,  142  Fed.  1010;  Ellis  v.  Inman,  131  Fed.  182; 
Bailey  v.  Master  Plumbers'  Assn.,  103  Tenu.  99;  Walsh  v. 
Master  Plumbers'  Assn.,  97  Mo.  App.  280;  Ferd  Heim  Brew- 
ing Co.  V.  Belinder,  97  Mo.  App.  64;  Straus  v.  American 
Publishers'  Assn.,  177  N.  Y.  473;  Bobbs  Merrill  Co.  v.  Straus, 
139  Fed.  155.)  But  such  agreements  have  been  held  not  in- 
valid under  exceptional  circumstances.  (Gladish  v.  Kansas 
City  Livestock  Exchange,  113  Mo.  App.  726;  Park  Sons 
Co.  V.  National  Assn.,  175  N.  Y.  1 ;  Brewster  v.  Millers  Sons 
Co.,  101  Ky.  368;  Whitwell  v.  Continental  Tobacco  Co.,  125 
Fed.  454.) 

§  99.     Moreover,  whenever  it  appeared  that  any  combina- 
tion, by  way  of  contract,  agreement,  trust,  or  whatever  the 


87  CORPORATE  CRIMES  AND  TORTS.  §  100 

plan  of  procedure,  had  for  its  real  object  monopoly  as  gen- 
erally understood,  such  combination  was  held  illegal  and  void 
at  common  law. 

§  100.  In  People  v.  North  River  Sugar  Refining  Co.  (1890), 
121  N.  Y.  582,  the  defendant  company  had  joined  a  combina- 
tion of  twenty  similar  companies,  under  an  agreement  whereby 
the  capital  stock  was  vested  in  a  managing  board  as  trustees, 
with  full  power  to  manage  the  business  of  the  companies 
severally  and  collectively.  It  was  held  that  the  company  had 
violated  its  corporate  duties  and  obligations  by  becoming 
party  to  such  a  trust,  and  must  be  dissolved.  Finch,  J,,  in 
delivering  the  opinion  of  the  court,  said : 

"The  combination,  therefore,  framed  by  the  deed  was  a 
trust ;  and  if  created  by  the  corporations  or  in  any  respect 
the  consequence  or  product  of  their  action,  some  inevitable 

results  would  be  certain  to  follow As  corporate  grants 

are  always  assumed  to  have  been  made  for  the  public  benefit, 
any  conduct  which  destroys  their  normal  functions  and  maims 
and  cripples  their  separate  activity,  and  takes  away  their  free 
and  independent  action,  must  so  far  disappoint  the  purpose 
of  their  creation  as  to  affect  unfavorably  the  public  interest; 
and  that  to  a  much  greater  extent  when,  beyond  their  own 
several  aggregations  of  capital,  they  compact  them  all  into 
one  combination,  Avhich  stands  outside  of  the  ward  of  the 
state,  which  dominates  the  range  of  an  entire  industry,  and 
puts  upon  the  market  a  capital  stock,  proudly  defiant  of  actual 
values  and  capable  of  unlimited  expansion.  It  is  not  a  suffi- 
cient answer  to  say  that  similar  results  may  be  lawfully  ac- 
complished; that  an  individual  having  the  necessary  wealth 
might  have  bought  all  these  refineries,  manned  them  with  his 
own  chosen  agents,  and  managed  them  as  a  group  at  his  sover- 
eign will ;  for  it  is  one  thing  for  the  state  to  respect  the  rights 
of  ownership  and  protect  them  out  of  regard  to  the  business 
freedom  of  the  citizen,  and  quite  another  thing  to  add  to  that 
possibility  a  further  extension  of  those  consequences  by  creat- 
ing artificial  persons  to  aid  in  producing  such  aggregations. 
....  Without  either  approval  or  disapproval  of  the  views 
expressed  upon  that  branch  of  the  case  by  the  courts  below, 
we  are  enabled  to  decide  that  in  this  state  there  can  be 
no  partnerships  of  separate  and  independent  corporations, 
whether  directly  or  indirectly,  through  the  medium  of  a  trust ; 
no  substantial  consolidations  which  avoid  and  disregard  the 


§  101  SUMMARY   OF    CORPORATION   LAW.  88 

statutor}'-  permissions  and  restraints;  but  that  manufactur- 
ing corporations  must  be  and  remain  several  as  they  were  cre- 
ated or  become  one  under  the  statute." 

§  101.  In  State  v.  Standard  Oil  Co.  (1892),  49  Ohio  St. 
137,  in  holding  that  the  Standard  Oil  Company  of  Ohio  should 
be  ousted  from  carrying  out  an  agreement  whereby  its  stock 
should,  with  that  of  other  similar  companies,  be  vested  in  a 
board  of  managing  trustees,  Minshall,  J.,  said: 

"Much  has  been  said  in  favor  of  the  objects  of  the  Standard 
Oil  Trust  and  what  it  has  accomplished.  It  may  be  true 
that  it  has  improved  the  quality  and  cheapened  the  costs  of 
petroleum  and  its  products  to  the  consumer.  But  such  is  not 
one  of  the  usual  or  general  results  of  a  monopoly,  and  it  is 
the  policy  of  the  law  to  regard  not  what  may,  but  what 
usually,  happens.  Experience  shows  that  it  is  not  wise  to 
trust  human  cupidity  where  it  has  the  opportunity  to  aggran- 
dize itself  at  the  expense  of  others.  The  claim  of  having 
cheapened  the  price  to  the  consumer  is  the  usual  pretext  on 
which  monopolies  of  the  kind  are  defended,  and  is  well  an- 
swered in  Richardson  v.  Buhl,  77  Mich.  632,  43  N.  AV.  1102. 
After  commenting  on  the  tendency  of  the  combination  known 
as  the  'Diamond  Match  Company'  to  prevent  fair  competi- 
tion and  to  control  prices,  Champlin,  J.,  said:  'It  is  no  answer 
to  say  that  this  monopoly  has  reduced  the  price  of  friction 
matches.  That  policy  may  have  been  necessary  to  crush  com- 
petition. The  fact  exists  that  it  rests  in  the  discretion  of  this 
company  at  any  time  to  raise  the  price  to  an  exorbitant  de- 
gree.' IMonopolies  have  always  been  regarded  as  contrary  to 
the  spirit  and  policy  of  the  common  law.  The  objections  are 
stated  in  the  'Case  of  Monopolies,'  Darcy  v.  Allein,  Coke 
pt.  II,  84b.  They  are  these:  (1)  'That  the  price  of  the  same 
commodity  will  be  raised,  for  he  who  has  the  sole  selling  of 
any  commodity  may  well  make  the  price  as  he  pleases.'  (2) 
'The  incident  to  a  monopoly  is  that  after  the  monopoly  is 
granted,  the  commodity  is  not  so  good  and  merchantable  as 
it  was  before;  for  the  patentee  having  the  sole  trade  regards 
only  his  private  benefit  and  not  the  com.monwealth.'  (3)  'It 
tends  to  the  impoverishment  of  divers  artificers  arid  others, 
who  before,  by  the  labor  of  their  hands  in  their  art  or  trade, 
had  maintained  themselves  and  their  families,  who  will  now 
of  necessity  be  constrained  to  live  in  idleness  and  beggary.' 
The  third  objection,  though  frequently  overlooked,  is  none 
the  less  important.  A  society  in  which  a  few  men  are  the 
employers  and  the  great  body  are  merely  employees  or  ser- 


89  CORPORATE  CRIMES  AND  TORTS.  §  102 

vants  is  not  the  most  desirable  in  a  republic;  and  it  should  be 
as  much  the  policy  of  the  laws  to  multiply  the  members  en- 
gao-ed  in  independent  pursuits  or  in  the  profits  of  production 
as  to  cheapen  the  price  to  the  consumer.  Such  policy  would 
tend  to  an  equality  of  fortunes  among  its  citizens,  thought 
to  be  so  desirable  in  a  "republic,  and  lessen  the  amount  of 
pauperism  and  crime.  It  is  true  that  in  the  case  just  cited 
the  monopoly  had  been  created  by  letters  patent.  But  the 
objections  lie  not  to  the  manner  in  Mdiich  the  monopoly  is 
created.  The  effect  on  industrial  liberty  and  the  price  of 
commodities  will  be  the  same,  whether  created  by  patent  or 
by  an  extensive  combination  among  those  engaged  in  similar 
industries  controlled  by  one  management.  By  the  invariable 
laws  of  human  nature,  competition  will  be  excluded  and  prices 
controlled  in  the  interest  of  those  connected  with  the  combina- 
tion or  trust." 

§  102.  In  Mogul  Steamship  Co.  v.  McGregor  (1889),  L.  R. 
23  Q.  B.  Div.  598,  affirmed  (1892),  H.  L.  App.  Cas.  25,  in  hold- 
ing that  a  combination  of  ship  owners,  for  the  purpose  of  cut- 
ting rates  in  the  shipment  of  tea  and  thus  keeping  the  business 
in  their  own  control,  driving  the  plaintiffs  from  the  field,  was 
not  an  unlawful  conspiracy  in  restraint  of  trade,  Bowen,  L.  J., 
said: 

"If,  indeed,  it  could  be  plainly  proved  that  the  mere  forma- 
tion of  'conferences,'  'trusts'  or  'associations'  such  as  these 
were  always  necessarily  injurious  to  the  public — a  view  which 
involves,  perhaps,  the  disputable  assumption  that,  in  a  coun- 
try of  free  tracle,  and  one  which  is  not  under  the  iron  regime 
of  statutory  monopolies,  such  confederations  can  ever  be 
really  successful — and  if  the  evil  of  them  were  not  sufficiently 
dealt  with  by  the  common-law  rule,  which  held  such  agree- 
ments to  be  void  as  distinct  from  holding  them  to  be  criminal, 
there  might  be  some  reason  for  thinking  that  the  common  law 
ought  to  discover  within  its  arsenal  of  sound  common-sense 
principles  some  further  remedy  commensurate  with  the  mis- 
chief. Neither  of  these  assumptions  are,  to  my  mind,  at  all 
evident,  nor  is  it  the  province  of  judges  to  mold  and  stretch 
the  law  of  conspiracy  in  order  to  keep  pace  with  the  calcula- 
tions of  political  economy.  If  peaceable  and  honest  combina- 
tions of  capital  for  purposes  of  trade  competition  are  to  be 
struck  at,  it  must,  I  think,  be  by  legislation,  for  I  do  not  see 
that  they  are  under  the  ban  of  the  common  law." 


§§  103,  104  SUMMARY    OF    CORPORATION   LAW.  90 

§  103.  In  1890,  it  being  conceded,  by  consensus  of  opinion 
more  or  less  general,  that  large  corporate  aggregations,  as  dis- 
tinguished from  combinations  by  way  of  agreement,  were  not 
merely,  by  reason  of  their  largeness,  illegal  at  common  law  as 
conspiracies,  monopolies  or  restraints  of  trade,  the  so-called 
Sherman  Anti-Trust  Act  was  enacted  by  Congress,  afterward 
supplemented  by  the  act  of  189-4,  by  which  contracts,  combina- 
tions in  the  form  of  trust  or  otherwise,  or  conspiracies  in  re- 
straint of  interstate  trade  or  commerce,  were  declared  illegal 
and  void. 

§  104.  In  the  application  of  these  statutory  provisions  to 
particular  cases,  two  questions  have  always  been  presented  for 
answer:  (1)  Is  the  contract,  combination  or  corporation  a 
transaction  in  interstate  or  foreign  commerce?  (2)  Is  it  in  re- 
straint of  trade?  This  latter  requires  that  a  construction 
be  placed  on  the  term  "restraint  of  trade,"  and  there  has 
been  voluminous  discussion  as  to  whether  that  means  much, 
nothing,  or  something.  It  has  been  recently  construed  to 
mean  something,  in  the  particular  circumstances  of  a  particu- 
lar case,  to  be  spotted  in  the  "light  of  reason." 

In  United  States  v.  E.  C.  Knight  Co.  (1894),  156  U.  S.  1, 
a  bill  was  filed  by  the  United  States  government  to  have  de- 
clared void  and  enjoined  an  agreement  whereby  the  American 
Sugar  Eefining  Company  agreed  to  take  over  the  stock  of 
several  Pennsylvania  sugar  refineries,  thereby  obtaining  prac- 
tical control  of  the  manufacture  of  sugar  in  the  United  States. 
The  supreme  court  affirmed  the  decree  of  the  courts  below 
dismissing  the  bill.  Fuller,  C.  J.,  in  the  opinion  of  the  court, 
held  that  while  the  agreements  did  tend  to  bring  about 
monopoly  in  the  manufacture  of  sugar  in  the  several  states, 
manufacture  was  not  trade  or  commerce,  and  the  agreements 
controlling  manufacture  within  the  states  did  not  restrain 
interstate  trade  or  commerce,  and  were  not  subject  to  regula- 
tion by  Congress;  Harlan,  J.,  dissenting  on  the  ground  that 
control  of  manufacture  controlled  prices  and  therefore  af- 
fected interstate  commerce,  and  therefore  was  subject  to  the 
provisions  of  the  act. 


91  CORPORATE  CRIMES  AND  TORTS.       §§  105,  106 

§  105.  In  United  States  v.  Freight  Assn.  (1896),  166  U.  S. 
290,  an  agreement  among  several  railroad  companies  made  in 
1889  to  maintain  rates  and  regulate  traffic  was  declared  illegal, 
as  in  restraint  of  interstate  commerce,  four  justices,  including 
White,  J.,  dissenting,  on  the  ground  that  it  was  not  an  unrea- 
sonable restraint. 

In  United  States  v.  Joint  Traffic  Assn.  (1898),  171  U.  S. 
505,  a  traffic  agreement  similar  to  the  Freight  Association 
agreement  was  held  invalid  as  a  restraint  of  trade,  with  the 
same  dissenting  justices. 

In  Addyston  Pipe  &  Steel  Co.  v.  United  States  (1899),  175 
U.  S.  211,  a  combination  of  pipe  nuanufacturers  regulating 
the  manufacture  and  the  marketing  and  sale  of  pipe  from  one 
state  to  another  was  held,  by  reason  of  the  latter,  distinguish- 
able from  the  Knight  case,  and  to  be  a  restraint  of  interstate 
trade  within  the  statute,  which  also  was  held  constitutional  as 
within  the  power  of  Congress  to  regulate  interstate  commerce. 

In  Connolly  v.  Union  Sewer-Pipe  Co.  (1902),  184  U.  S. 
540,  it  was  held  that  while  a  combination  might  be  illegal  as 
such,  that  did  not  prevent  recovery  for  product  sold. 

In  Montague  &  Co.  v.  Lowry  (1903),  193  U.  S.  38,  a  com- 
bination of  manufacturers  of  tiles  in  California  and  elsewhere, 
regulating  the  manufacture  and  sale  of  tiles,  was  held  illegal, 
and  the  parties  injured  entitled  to  treble  damages  under  the 
statute. 

§  106.  In  Northern  Securities  Co.  v.  United  States  (1904), 
193  U.  S.  197,  it  was  held,  Harlan,  J.,  delivering  the  opinion  of 
the  court,  that  a  holding  company  formed  to  acquire  a  ma- 
jority of  the  stock  of  two  great  competing  railroads  was  a 
combination  in  restraint  of  trade  within  the  statute,  and  was 
illegal,  and  the  holding  company  was  enjoined  from  voting 
or  otherwise  controlling  the  stock  of  the  respective  railroad 
companies;  "White,  Fuller,  C.  J.,  Peckham  and  Holmes,  JJ., 
dissenting  on  the  ground  that  such  a  construction  and  exten- 
sion of  the  Sherman  Act  was  in  excess  of  the  power  of  Con- 
gress and  in  violation  of  fundamental  property  rights. 

In  Loewe  v.  Lawlor  (1908),  208  U.  S.  274,  it  was  held  that  a 
combination  of  labor  organizations  to  compel  a  manufacturer 


§  107  SUMMARY   OF    CORPORATION   LAW.  92 

to  unionize  his  shops  or  boycott  his  business  in  different  states 
was  an  illegal  combination  in  restraint  of  trade  in  violation 
of  the  act. 

In  Shawnee  Co.  v.  Anderson  (1908),  209  U.  S.  423,  a  lease 
by  a  comipany  of  its  goodwill  and  business  was  held  void,  as 
being,  under  the  circumstances  of  the  case,  in  restraint  of 
interstate  commerce. 

In  Swift  &  Co.  V.  United  States  (1905),  196  U.  S.  375,  it 
was  held,  in  an  opinion  by  Holmes,  J.,  that  a  combination 
of  meat-packers  regulating  prices  and  shipments  was  in  viola- 
tion of  the  Sherman  Act,  as  being  in  restraint  of  commerce, 
being  distinguished  from  the  Knight  case,  as  that  involved 
only  a  combination  in  manufacture. 

§  107.  In  Standard  Oil  Co.  v.  United  States  (1911),  221 
U.  S.  1,  the  Standard  Oil  Company  was  held  to  be  a  combina- 
tion in  restraint  of  trade  within  the  statute,  and  ordered  dis- 
solved ;  White,  C.  J.,  in  the  opinion  of  the  court,  stating,  as 
part  of  the  reasoning  on  which  the  decision  was  reached,  that 
the  act  must  be  construed  in  the  light  of  reason,  and  the  mean- 
ing of  "restraint  of  trade"  must  be  determined,  with  reference 
to  the  scope  of  its  usage  at  the  time  of  the  passage  of  the  act, 
not  to  be  any  and  every  restraint  in  the  strictest  sense,  but 
restraints  found,  on  fair  inspection  of  the  circumstances  sur- 
rounding a  particular  case,  to  be  reasonably  calculated  to 
produce  the  evil  aimed  at  in  the  act;  Harlan,  J.,. concurring 
in  the  result,  but  dissenting  from  the  reasoning  of  the  chief 
justice,  insisting  on  a  strict  and  literal  construction  of  the 
term  "restraint  of  trade." 

Similarly,  United  States  v.  American  Tobacco  Co.  (1911), 
221  U.  S.  106. 


93  STOCKHOLDERS.  §§  HO,  HI 


CHAPTER  VI. 

STOCKHOLDERS. 

§  110.  A  corporation,  by  reason  of  its  peculiar  character 
as  a  legal  entity  purely  the  creature  of  statute,  has  marked 
characteristics  in  its  mutual  relations  with  certain  individuals 
and  groups  of  individuals  composed  of  its  membership,  or 
stockholders,  directors  and  officers. 

The  mutual  rights,  duties  and  liabilities  existing  between 
the  corporation  and  these  individuals  and  groups  of  individ- 
uals are  for  the  most  part  contractual,  the  terms  and  limits 
of  the  contractual  rights,  duties  and  obligations  being  partly 
statutory  and  partly  by  way  of  express  agreement  between 
the  parties  and  the  corporation  and  the  parties.  In  the  first 
place,  the  rights,  duties  and  liabilities  of  stockholders  as 
between  themselves,  the  corporation  and  third  parties  will 
be  summarily  stated. 

§  111.  An  individual  by  becoming  a  stockholder  in  a  cor- 
poration, whether  by  subscription  to  its  stock  on  its  formation 
or  by  purchase  of  stock  later,  may  with  precision  be  said  to  as- 
sume a  contractual  status,  as  distinguished  from  a  right  of 
property  or  a  chose  in  action,  in  relation  to  the  corporation  in 
question,  defined  by  the  governing  corporation  law,  the  char- 
ter, tlie  by-laws  and  the  particular  terms  embodied  in  the 
stock  subscription  and  stock  certificate.  It  is  not  a  right  of 
property,  for  the  stockholder  does  not  own  any  part  of  the 
corporate  property,  even  his  certificate  of  stock  being  simply 
evidence  of  his  status  as  a  stockholder.  It  is  not  a  chose  in 
action,  for  the  corporation  is  under  no  pecuniary  liability  to 
the  stockholder  as  such.  It  may,  however,  in  various  events 
give  rise  to  a  chose  in  action;  as,  for  instance,  in  case  a  divi- 
dend is  declared  and  not  paid,  and  in  the  event  of  dissolution 
or  other  termination  of  the  corporation  the  stockholder  is  en- 
titled to  have  his  pro  rata  share  of  the  assets  over  liabilities 
paid  and  delivered  over  to  him. 


§§  112,  113  SUMMARY   OF  CORPORATION  LAW.  94 

§  112.  On  subscribing  to  the  stock  of  a  corporation  the  sub- 
scriber becomes  liable  to  pay  the  amount  of  his  subscription, 
which  is  the  limit  of  his  liability,  unless  otherwise  provided  by 
statute.  He  becomes  by  so  subscribing  a  member  and  stock- 
holder of  the  corporation,  having  the  right  to  participate  as 
such  in  the  management  of  the  corporation,  by  voting  at 
stockholders'  meetings  and  otherwise  in  accordance  with  the 
charter  and  by-laws  when  adopted,  to  have  a  stock  certificate 
as  evidence  of  membership,  and  to  share  in  any  dividends  de- 
clared and  in  the  assets  of  the  corporation  on  its  termination, 
by  dissolution  or  otherwise.  The  stockholder  has  a  right  to 
have  the  corporation  managed  and  conducted  for  the  benefit 
of  the  whole  body  of  stockholders  in  accordance  with  the 
charter,  but  the  judgment  and  action  of  that  majority  of  the 
stockholders  required  by  the  by-laws  for  action  in  the  partic- 
ular case,  whether  acting  directly  or  through  the  directors 
and  officers,  is  conclusive  and  binding  in  and  out  of  court, 
unless  fraud  or  a  violation  of  the  charter  is  clearly  shown. 

On  the  transfer  of  stock  the  transferee  succeeds  to  the 
rights  and  liabilities  of  the  transferrer,  except  that  the  trans- 
feree must  enforce  his  right  to  have  the  transfer  recorded 
in  the  books  of  the  company  before  he  will  be  recognized  as 
a  stockholder  and  member  of  the  corporation,  at  the  same 
time  obtaining  a  stock  certificate  in  his  own  name  as  evidence 
of  membership. 

§  113,  In  holding  that  a  corporation  owning  stock  in  an- 
other corporation  had  no  interest  in  the  property  of  the  latter 
which  it  could  mortgage.  Field,  J.,  in  Humphreys  v.  McKis- 
sock,  140  U.  S.  304,  p.  312,  said: 

"The  property  of  a  corporation  is  not  subject  to  the  con- 
trol of  individual  members,  whether  acting  separately  or 
jointly.  They  can  neither  encumber  nor  transfer  that  prop- 
erty nor  authorize  others  to  do  so.  The  corporation — the 
artificial  being  created — holds  the  property  and  alone  can 
mortgage  or  transfer  it;  and  the  corporation  acts  only 
through  its  officers,  subject  to  the  conditions  prescribed  by 
law. 

"In  Smith  v.  Hurd,  12  Met.  371,  385,  the  relations  of  stock- 
holders to  the  rights  and  property  of  a  banking  corporation 
are  stated  with  his  usual  clearness  and  precision  by  Chief 


95  STOCKHOLDERS.  §  114 

Justice  Shaw,  speaking  for  the  supreme  court  of  Massachu- 
setts, and  the  same  doctrine  applies  to  the  relations  of  stock- 
holders in  all  business  corporations.  Said  the  chief  justice: 
'The  individual  members  of  a  corporation,  whether  thev 
should  all  join  or  each  act  severally,  have  no  right  or  power 
to  intermeddle  with  the  property  or  concerns  of  the  bank, 
or  call  any  officer,  agent  or  servant  to  account  or  discharge 
Ihem  from  any  liability.  Should  all  the  stockholders  join 
in  a  power  of  attorney  to  anyone,  he  could  not  take  posses- 
sion of  any  real  or  personal  estate,  any  security  or  chose  in 
action ;  could  not  collect  a  debt  or  discharge  a  claim,  or  re- 
lease damage  arising  from  any  default ;  simply  because  they 
are  not  the  legal  owners  of  the  property,  and  damage  done 
to  such  property  is  not  an  injury  to  them.  Their  rights  and 
their  powers  are  limited  and  well  defined.'  " 

While  the  stockholders  do  not  own  the  corporate  property, 
they  nevertheless  control  corporate  action,  and  in  holding  that 
corporate  action  approved  by  the  stockholders  but  not  formally 
acted  upon  by  the  directors  was  valid,  Fuller,  C.  J.,  in  Union 
Pacific  Ry.  Co.  v.  Chicago  etc.  Ry.  Co.,  163  U.  S.  564,  p.  596, 
said: 

"When  by  the  charter  of  a  corporation  its  powers  are 
vested  in  its  stockholders,  and  this  was  the  common-law  rule 
when  the  charter  was  silent,  the  ultimate  determination  of 
the  management  of  the  corporate  affairs  rests  with  its  stock- 
holders, and  the  charter  of  the  Pacific  Company  did  not  com- 
mit the  exclusive  control  to  the  board  of  directors." 

§  114.  In  Jellenik  v.  Huron  Copper  Mining  Co.,  177  TJ.  S. 
1,  Harlan,  J.,  in  holding  that  stock  in  a  corporation  had  its  situs 
for  the  purpose  of  conferring  jurisdiction  at  the  domicile  of 
the  company,  said  (p.  13)  : 

"The  certificates  are  only  evidence  of  the  ownership  of  the 
shares,  and  the  interest  represented  by  the  shares  is  held  by 
the  company  for  the  benefit  of  the  true  owner.  As  the  habi- 
tation or  domicile  of  the  company  is  and  must  be  in  the  state 
that  created  it,  the  property  represented  by  its  certificates  of 
stock  may  be  deemed  to  be  held  by  the  company  within  the 
state  whose  creature  it  is,  whenever  it  is  sought  by  suit  to 
determine  who  is  its  real  owner.  This  principle  is  not 
affected  by  the  fact  that  the  defendant  is  authorized  by  the 
laws  of  Michigan  to  have  an  office  in  another  state  at  which 
a  book  showing  the  transfers  may  be  kept." 


§§  115,  116  SUMMARY    OF    CORPORATION   LAW.  96 

§  115.  In  holding  that  one  in  whose  name  stock  stood  as 
trustee  and  by  way  of  collateral  security  could  vote  the  stock 
without  thereby  becoming  beneficial  owner  and  liable  as  such, 
Bradley,  J.,  in  Burgess  v.  Seligman,  107  U.  S.  20  (p.  29),  said: 

"When  the  law  provides  that  if  a  person  holds  stock  as  a 
trustee,  or  by  way  of  collateral  security  only,  he  shall  not  be 
personally  liable  for  the  company's  debts,  it  supposes  that 
the  stock  shall  be  holden  and  that  the  pledgee  or  trustee  shall 
be  the  holder.  If,  then,  the  law  is  to  have  any  force  or  effect, 
the  mere  fact  of  holding  cannot  be  set  up  as  a  bar  or  estoppel 
against  proof  of  the  manner  and  character  of  such  holding. 
And  if  such  pledgee  or  trustee  may  be  a  holder  of  the  stock 
in  that  character,  is  he  bound  to  be  perfectly  passive  in  his 
holding?  He  will  not  be  entitled  to  any  dividends  or  profits, 
it  is  true ;  or  if  he  receives  dividends  or  profits  he  must  ac- 
count therefor;  but  is  it  certain  that  he  may  not  lawfully 
vote  on  the  stock?  An  executor,  administrator,  guardian  or 
trustee  certainly  may  vote ;  and  vrhere  is  the  rule  to  be  found 
that  a  holder  for  collateral  security  under  a  law  which  per- 
mits such  holding  may  not  vote  on  the  stock  so  held  without 
losing  his  character  as  a  mere  pledgee?  But  as  before  said, 
if  the  pledgee  in  voting  the  stock  exceeds  his  rights  as  such 
pledgee,  it  cannot  have  the  effect  of  making  the  stock  his 
own." 

§  116.  In  holding  a  subscription  valid  where  enough  had 
been  done  to  constitute  a  contract  and  that  the  subscriber  was 
not  relieved  by  the  subsequent  consolidation  of  the  company 
with  another  authorized  by  the  statute  at  the  time  of  the  sub- 
scription. Strong,  J.,  in  Nugent  v.  Supervisors,  19  Wall.  241 
(p.  247),  said: 

"The  fact  that  no  subscription  was  formally  made  upon 

the  books  of  the  company  is  quite  immaterial There 

was  not  only  the  resolution  declaring  the  subscription  made, 
but  there  was  an  acceptance  by  the  railroad  company  and 
notice  of  the  acceptance.  The  minds  of  the  parties  came 
together." 

Again  (p.  250)  : 

"In  a  multitude  of  cases  decided  in  England  and  in  this 
country  it  has  been  determined  that  a  subscriber  for  the  stock 
of  a  company  is  not  released  from  his  engagement  to  take 
it  and  pay  for  it  by  any  alteration  of  the  organization  or 


97  STOCKHOLDERS.  §§  117,  118 

purposes  of  the  company  which  at  the  time  the  subscription 
was  made  were  authorized  either  by  the  general  law  or  by 
the  special  charter,  and  a  clear  distinction  is  recognized 
between  the  effect  of  such  alterations  and  the  effect  of  those 
made  under  legislation  subsequent  to  the  contract  of  sub- 
scription  They  uniformly  assert  that  the  subscriber 

for  stock  is  released  from  his  subscription  by  a  subsequent 
alteration  of  the  organization  or  purposes  of  the  company 
only  when  such  alteration  is  both  fundamental  and  not  pro- 
vided for  or  contemplated  by  either  the  charter  itself  or  the 
general  laws  of  the  state." 

§  117.  In  holding  that  an  action  lay  for  the  conversion  of 
stock  transferred  in  blank,  Waite,  J.,  in  McAllister  v.  Kuhn,  96 
U.S.  87,  p.  89,  said: 

"There  can  be  no  doubt  that  shares  of  stock  in  a  corpora- 
tion may  be  transferred  by  means  of  an  assignment  and  de- 
livery of  certificates.  It  is  true  that  a  certificate  of  stock 
is  not  the  stock  itself;  but  it  is  documentary  evidence  of  title 
to  stock,  and  may  be  used  for  the  purposes  of  symbolical  de- 
livery, as  the  stock  itself  is  incapable  of  actual  delivery.  A 
blank  indorsement  of  a  certificate  may  be  filled  up  by  writ- 
ing an  assignment  and  power  of  attorney  over  the  signature 
indorsed,  and  in  this  way  an  actual  transfer  of  the  stock  on 
the  books  of  the  corporation  may  be  perfected.  A  wrongful 
use  of  such  an  indorsed  certificate  for  such  a  purpose  may 
operate  as  a  conversion  of  the  stock." 

§  118.  In  holding  that  a  transfer  of  stock  is  complete  when 
registered  on  the  books  of  the  company  irrespective  of  the 
stock  certificate  to  which,  however,  the  transferee  is  entitled, 
Matthews,  J.,  in  National  Bank  v.  Watsontown  Bank,  105 
U.  S.  217,  p.  222,  said: 

"A  complete  transfer  of  the  title  to  the  stock  upon  the 
books  of  the  bank,  it  is  not  doubted,  would  have  the  effect 
to  vest  it  in  the  transferee,  free  from  any  claim  or  lien  of  the 
bank.  The  consent  of  the  bank,  made  necessary  to  such 
transfer,  is  the  waiver  of  its  right,  as  its  refusal  would  be  the 
assertion  of  it.  The  transfer  when  thus  consummated  de- 
stroys the  relation  of  membership  between  the  corporation 
and  the  old  stockholder  with  all  its  incidents,  and  creates 
an  original  relation  with  the  new  member  free  from  all  ante- 
cedent obligations.  This  legal  relation  and  proprietary  inter- 
7 


§§  119,  120  SUMMARY   OF    CORPORATION   LAW.  98 

est  on  -which  it  is  based  are  quite  independent  of  the 
certificate  of  ownership,  which  is  mere  evidence  of  title.  The 
complete  fact  of  title  may  very  well  exist  without  it.  All 
that  is  necessary,  when  the  transfer  is  required  by  law  to  be 
made  upon  the  books  of  the  corporation,  is  that  the  fact 
should  be  appropriately  recorded  in  some  suitable  register  or 
stock  list,  or  otherwise  formally  entered  upon  its  books." 

§  119.  In  holding  that  a  transferee  in  blank  of  stock  takes 
subject  to  liens  imposed  by  statute,  Brewer,  J.,  in  Hammond  v. 
Hastings,  134  U.  S.  401,  p.  404,  said: 

"Repeated  efforts  have  been  made  to  have  certificates  of 
stock  declared  negotiable  paper,  but  they  have  been  unsuc- 
cessful. Such  a  certificate  is  not  negotiable  in  either  form  or 
character;  and  like  every  non-negotiable  paper,  whoever 
takes  it  does  so  subject  to  its  equities  and  burdens;  and 
though  ignorant  of  such  equities  and  burdens,  his  ignorance 
does  not  relieve  the  paper  therefrom,  or  enable  him  to  hold 
it  discharged  therefrom." 

§  120.  In  holding  that  a  transfer  of  stock  on  the  books  of  a 
company  under  and  pursuant  to  a  forged  transfer  in  blank  was 
invalid  against  the  true  owner,  Field,  J.,  in  Telegraph  Co.  v. 
Davenport,  97  U.  S.  369,  p.  371,  said: 

"Forgery  can  confer  no  power  nor  transfer  any  rights. 
The  officers  of  the  company  are  the  custodians  of  its  stock- 
books,  and  it  is  their  duty  to  see  that  all  transfers  of  shares 
are  properly  made,  either  by  the  stockholders  themselves  or 
persons  having  authority  from  them.  If  upon  the  presenta- 
tion of  a  certificate  for  transfer  they  are  at  all  doubtful  of 
the  identity  of  the  party  offering  it  with  its  owner,  or  if  not 
satisfied  of  the  genuineness  of  a  power  of  attorney  produced, 
they  can  require  the  identity  of  the  party  in  the  one  case  and 
the  genuineness  of  the  document  in  the  other,  to  be  satis- 
factorily established  before  allowing  the  transfer  to  be  made. 
In  either  case  they  must  act  upon  their  own  responsibility. 
In  many  instances  they  may  be  misled  without  any  fault  of 
their  own,  just  as  the  most  careful  person  may  sometimes  be 
induced  to  purchase  property  from  one  who  has  no  title  and 
who  may  perhaps  have  acquired  its  possession  by  force  or 
larceny.  Neither  the  absence  of  blame  on  the  part  of  the 
officers  of  the  company  in  allowing  an  unauthorized  transfer 
of  stock  nor  the  good  faith  of  the  purchaser  of  stolen  prop- 


99  STOCKHOLDERS.  §  121 

erty  will  avail  as   an  answer  to   the  demand   of  the  true 
owner." 

§  121.  In  holding  a  transferee  of  stock  on  the  books  of  a 
company  bound  to  pay  unpaid  balances  on  stock,  Strong,  J.,  in 
Webster  v.  Upton,  Assignee,  91  U.  S.  64  (p.  67),  said: 

"Stockholders  become  such  in  several  ways, — either  by 
original  subscription,  or  by  assignment  of  prior  holders,  or 
by  direct  purchase  from  the  company.  An  express  promise 
is  almost  unknown,  except  in  the  case  of  an  original  subscrip- 
tion; and  oftener  than  otherwise  it  is  not  made  in  that.  The 
subscriber  merely  agrees  to  take  stock.  He  does  not  ex- 
pressly promise  to  pay  for  it.  Practically,  then,  unless  the 
ownership  of  such  stock  carries  with  it  the  legal  duty  of  pay- 
ing all  legitimate  calls  made  during  the  continuance  of  the 
ownership,  the  fund  held  in  trust  for  creditors  is  only  that 
portion  of  each  share  which  was  paid  prior  to  the  organiza- 
tion of  the  company, — in  many  cases  not  more  than  five  per 
cent ;  in  the  present  case  only  twenty.  Then  the  company 
commences  business  and  incurs  obligations,  representing  all 
the  while  to  those  who  deal  with  it  that  its  capital  is  the 
amount  of  stock  taken,  when  in  truth  the  fund  which  is  held 
in  trust  for  creditors  is  only  that  part  of  the  stock  which  has 
been  actually  paid  in.     This  cannot  be 

"The  plain  object  of  the  statute,  therefore,  would  be  de- 
feated if  there  was  no  liability  of  the  stockholder  to  pay  the 
full  prescribed  amount  of  each  share  of  his  stock.  With  this 
plain  object  of  the  legislature  in  view,  it  must  be  assumed, 
after  the  verdict  of  the  jury,  the  defendant  voluntarily  be- 
came a  stockholder.  Either  he  must  have  designed  to  de- 
feat the  legislative  intent,  or  he  must  have  consented  to  carry 
it  out.  The  former  is  not  to  be  presumed,  and  if  the  latter 
was  the  fact,  coming  as  he  did  into  privity  with  the  company, 
there  is  a  necessary;  implication  that  he  undertook  to  com- 
plete the  payment  of  all  that  was  unpaid  of  the  shares  he 
held  whenever  it  should  be  demanded.  To  constitute  a  prom- 
ise binding  in  law,  no  form  of  words  is  necessary.  An  im- 
plied promise  is  proved  by  circumstantial  evidence ;  by  proof 
of  circumstances  that  show  the  party  intended  to  assume  an 
obligation.  A  party  may  assume  an  obligation  by  putting 
himself  into  a  position  which  requires  the  performance  of 
duties But  if  the  law  implies  a  promise  by  the  orig- 
inal holders  or  subscribers  to  pay  the  full  par  value  when  it 
may  be  called,  it  follows  that  an  assignee  of  the  stock  when 
he  has  come  into  privity  with  the  company  by  having  stock 


§  122  SUMMARY   OP   CORPORATION   LAW.  100 

transferred  to  him  on  the  company's  books  is  equally  liable. 
The  same  reasons  exist  for  implying  a  promise  by  him  as 
exist  for  raising  up  a  promise  by  his  assignor.  And  such  is 
the  law  as  laid  down  by  the  textwriters  generally,  and  by 

many  decisions  of  the  courts In  Angell  and  Ames  on 

Corporations,  section  534,  it  is  said:  'When  an  original  sub- 
scriber to  the  stock  of  an  incorporated  company,  who  is  so 
bound  to  pay  the  installments  on  his  subscription  from  time 
to  time,  as  they  are  called  in  by  the  company,  transfers  his 
stock  to  another  person,  such  other  person  is  substituted  not 
only  to  the  rights,  but  to  the  obligations,  of  the  original  sub- 
scriber, and  he  is  bound  to  pay  up  the  installments  called 
for  after  the  transfer  to  him.  The  liability  to  pay  the  in- 
stallments is  shifted  from  the  outgoing  to  the  incoming 
stockholder.  A  privity  is  created  between  the  two  by  the 
assignment  of  the  one  and  the  acceptance  of  the  other,  and 
also  between  them  and  the  corporation ;  for  it  would  be  ab- 
surd to  say,  upon  general  reasoning,  that,  if  the  original  sub- 
scribers have  the  power  of  assigning  their  shares,  they 
should,  after  disposing  of  them,  be  liable  to  the  burdens 
which  are  thrown  upon  the  owners  of  the  stock.' 

"So  in  Redfield  on  Railways,  53,  it  is  said  the  cases  agree 
that  whenever  the  name  of  the  vendee  of  shares  is  trans- 
ferred to  the  register  of  shareholders,  the  vendor  is  exoner- 
ated, and  the  vendee  becomes  liable  for  calls.  We  think, 
therefore,  the  transferee  of  stock  in  an  incorporated  com- 
pany is  liable  for  calls  made  after  he  has  been  accepted  by 
the  company  as  a  stockholder  and  his  name  has  been  regis- 
tered on  the  stock-books  as  a  corporator;  and,  being  thus 
liable,  there  is  an  implied  promise  that  he  will  pay  calls  when 
made  while  he  continues  the  owner." 

§  122.  In  holding  a  stockholder  liable  for  unpaid  install- 
ments of  stock  regardless  of  agreements  or  representations  to 
the  contrary  by  the  company  or  its  agents.  Hunt,  J.,  in  Upton 
V.  Tribilcock,  91  U.  S.  45,  p.  47,  said : 

"The  acceptance  and  holding  of  a  certificate  of  shares  in 
an  incorporation  makes  the  holder  liable  to  the  responsibili- 
ties of  a  shareholder.  Brigham  v.  Mead,  10  Allen,  245 ;  Buff 
City  R.  R.  Co.  v.  Douglass,  14  N.  Y.  336 ;  Seymour  v.  Sturges, 
26  Id.  134.  The  capital  stock  of  a  moneyed  corporation  is 
a  fund  for  the  payment  of  its  debts.  It  is  a  trust  fund  of 
which  the  directors  are  the  trustees.  It  is  a  trust  to  be  man- 
aged for  the  benefit  of  its  shareholders  during  its  life,  and 


101  STOCKHOLDERS.  §  123 

for  the  benefit  of  its  creditors  in  the  event  of  its  dissolution. 
This  duty  is  a  sacred  one  and  cannot  be  disrej^arded.  Its 
violation  will  not  be  undertaken  by  any  just-minded  man, 
and  will  not  be  permitted  by  the  courts.  The  idea  that  the 
capital  of  a  corporation  is  a  football  to  be  thrown  into  the 
market  for  the  purpose  of  speculation,  that  its  value  may  be 
elevated  or  depressed  to  advance  the  interests  of  its  man- 
agers, is  a  modern  and  wicked  invention.  Equally  unsound 
is  the  opinion  that  the  obligation  of  a  subscriber  to  pay  his 
subscription  may  be  released  or  surrendered  to  him  by  the 
trustees  of  the  company.  This  has  often  been  attempted,  but 
never  successfully.  The  capital  paid  in,  and  promised  to  be 
paid  in,  is  a  fund  which  the  trustees  cannot  squander  or  give 
away.  They  are  bound  to  call  in  what  is  unpaid,  and  care- 
fully to  husband  it  when  received.  Sawyer  v.  Hoag,  17  Wall. 
610;  Tuckerman  v.  Brown,  33  N.  Y.  297 ;  Ogilvie  v.  Knox  Ins. 
Co.,  22  How.  380;  Osgood  v.  Laytin,  3  Keys,  521." 

§  123.  In  a  suit  by  a  judgment  creditor  to  enforce  liability 
of  stockholders  to  whom  stock  had  been  issued  for  property, 
Coit  V.  Gold  Amalgamating  Co.,  119  U.  S.  343,  Field,  J.,  hold- 
ing the  stockholder  not  liable  in  the  absence  of  fraud,  said: 

"The  plaintiff  contends,  and  it  is  the  principal  basis  of  his 
suit,  that  the  valuation  thus  put  upon  the  property  was  ille- 
gally and  fraudulently  made  at  an  amount  far  above  its 
actual  value,  averring  that  the  property  consisted  only  of  a 
machine  for  crushing  ores,  the  right  to  use  a  patent  called 
the  Crosby  process,  and  the  charter  of  the  proposed  organiza- 
tion; that  the  articles  had  no  market  or  actual  value,  and, 
therefore,  that  the  capital  stock  issued  thereon  was  not  fully 
paid,  or  paid  to  any  substantial  extent,  and  that  the  holders 
thereof  were  still  liable  to  the  corporation  and  its  creditors 
for  the  unpaid  subscription. 

''If  it  were  proved  that  actual  fraud  was  committed  in  the 
payment  of  the  stock,  and  that  the  complainant  had  given 
credit  to  the  company  from  a  belief  that  its  stock  was  fully 
paid,  there  would  undoubtedly  be  substantial  ground  for  the 
relief  asked.  But  where  the  charter  authorizes  capital  stock 
to  be  paid  in  property,  and  the  shareholders  honestly  and  in 
good  faith  put  in  property  instead  of  money  in  payment  of 
their  subscriptions,  third  parties  have  no  ground  of  com- 
plaint. The  case  is  very  different  from  that  in  which  sub- 
scriptions to  stock  are  payable  in  cash,  and  where  only  a  part 
of  the  installments  has  been  paid.     In  that  case  there  is  still 


§  124  SUMMARY   OF   CORPORATION   LAW.  102 

a  debt  due  to  the  corporation,  which  if  it  becomes  insolvent, 
may  be  questioned  in  equity  by  the  creditors,  as  a  trust  fund 
liable  to  the  payment  of  their  debts.  But  where  full  paid 
stock  is  issued  for  property  received,  there  must  be  actual 
fraud  in  the  transaction  to  enable  creditors  of  the  corpora- 
tion to  call  stockholders  to  account.  A  gross  and  obvious 
overvaluation  of  property  would  be  strong  evidence  of  fraud. 
Boynton  v.  Hatch,  47  N.  Y.  225 ;  Van  Cott  v.  Van  Brunt,  82 
N.  Y.  535;  Carr  v.  Le  Fevre,  27  Pa.  413." 

Where  stock  was  issued  for  property  fraudulently  over- 
valued, Shiras,  J.,  in  holding  bona  fide  creditors  entitled  to 
enforce  actual  payment  by  the  subscribers  in  Lloyd  v.  Pres- 
ton, 146  U.  S.  630,  said  (p.  642)  : 

"It  having  been  found,  on  convincing  evidence,  that  the 
overvaluation  of  the  property  transferred  to  the  railway  com- 
pany by  Harper,  in  pretended  payment  of  the  subscriptions 
to  the  capital  stock,  was  so  gross  and  obvious  as,  in  connection 
with  the  other  facts  in  the  case,  to  clearly  establish  a  case  of 
fraud,  and  to  entitle  bona  fide  creditors  to  enforce  actual  pay- 
ment by  the  subscribers,  it  only  remains  to  consider  the  effect 
of  the  defenses  set  up." 

§  124.  In  holding  that  the  unpaid  balance  of  a  stock  sub- 
scription could  not  be  satisfied  by  setoff  of  an  ordinary  debt 
due  by  the  company  to  one  of  its  creditors,  for  the  reason  that 
the  capital  stock  of  a  corporation  is  a  trust  fund  for  the  benefit 
of  creditors.  Miller,  J.,  in  Sawyer  v.  Hoag,  17  Wall.  610,  said 
(p.  620)  : 

"Though  it  be  a  doctrine  of  modern  date,  we  think  it  now 
well  established  that  the  capital  stock  of  a  corporation,  espe- 
cially its  unpaid  subscriptions,  is  a  trust  fund  for  the  benefit 
of  the  general  creditors  of  the  corporation.  And  when  we 
consider  the  rapid  development  of  corporations  as  instru- 
mentalities of  the  commercial  and  business  world  in  the  last 
few  years,  with  the  corresponding  necessity  of  adapting  legal 
principles  to  the  new  and  varying  exigencies  of  thi.s  business, 
it  is  no  solid  objection  to  such  a  principle  that  i-t  is  modern, 
for  the  occasion  for  it  could  not  sooner  have  arisen. 

"The  principle  is  fully  asserted  in  two  recent  cases  in  this 
court,  namely,  Burke  v.  Smith,  16  Wall.  390,  and  in  New 
Albany  v.  Burke,  11  Wall.  96.  Both  these  cases  turned  upon 
the  doctrine  we  have  stated,  and  upon  the  necessary  infer- 
ence from  that  doctrine  that  the  governing  officers  of  a  cor- 


103  STOCKHOLDERS.  §  125 

poration  cannot  by  agreement  or  other  transaction  with  the 
stockholder  release  the  latter  from  his  obligation  to  pay,  to 
the  prejudice  of  its  creditors,  except  by  fair  and  honest  deal- 
ing and  for  a  valuable  consideration It  is  very  true 

that  by  the  power  of  the  legislature  there  is  created  in  all 
acts  of  incorporation  a  legal  entity  which  can  contract  with 
its  shareholders  in  the  ordinary  transactions  of  business  as 
with  other  persons.  It  can  buy  of  them,  sell  to  them,  make 
loans  to  them,  and,  in  insurance  companies,  make  contracts 
of  insurance  with  them,  in  all  of  which  both  parties  are 
bound  by  the  ordinary  laws  of  contract.  The  stockholder  is 
also  relieved  from  personal  liability  for  the  debts  of  the  com- 
pany. But  after  all,  this  artificial  body  is  but  the  representa- 
tive of  its  stockholders,  and  exists  mainly  for  their  benefit, 
and  is  governed  and  controlled  by  them  through  the  officers 
whom  they  elect.  And  the  interest  and  power  of  legal  con- 
trol of  each  stockholder  is  in  exact  proportion  to  the  amount 
of  his  stock.  It  is  therefore  but  just  that  when  the  interest 
of  the  public,  or  of  strangers  dealing  with  this  corporation, 
is  to  be  affected  by  any  transaction  between  the  stockholders 
who  own  the  corporation  and  the  corporation  itself,  such 
transaction  should  be  subject  to  a  rigid  scrutiny,  and  if  found 
to  be  infected  with  anything  unfair  toward  such  third  person 
calculated  to  injure  him,  or  designed  intentionally  and  in- 
equitably to  screen  the  stockholder  from  loss  at  the  expense 
of  the  general  creditor,  it  should  be  disregarded  or  annulled 
so  far  as  it  may  inequitably  affect  him." 

In  holding  a  stockholder  of  record  liable  for  statutory 
assessments  on  the  stock,  Clifford,  J.,  in  TurnbuU  v.  Payson, 
95  U.  S.  418,  said  (p.  421)  : 

"Where  the  name  of  an  individual  appears  on  the  stock- 
book  of  a  corporation  as  a  stockholder,  the  prima  facie  pre- 
sumption is  that  he  is  the  owner  of  the  stock,  in  a  case  where 
there  is  nothing  to  rebut  that  presumption;  and  in  an  action 
against  him  as  a  stockholder,  the  burden  of  proving  that  he 
is  not  a  stockholder  or  of  rebutting  that  presumption  is  cast 
upon  the  defendant." 

§  125.  In  Handley  v.  Stutz,  139  U.  S.  417,  it  was  held  that 
where  a  corporation,  not  insolvent  but  being  under  the  neces- 
sity of  raising  additional  capital,  increased  its  capital  stock,  dis- 
tributed part  of  such  increased  stock  gratuitously  among  its 
existing  stockholders,  but  sold  the  balance  with  bonds  at  less 


§  125  SUMMARY   OF   CORPORATION   LAW.  104 

than  par  but  at  the  best  price  obtainable,  the  gratuitous  dis- 
tributees were  liable  as  original  subscribers,  to  creditors  gen- 
erally, but  the  bond  and  stock  purchasers  were  liable  for 
balances  between  the  sale  price  and  the  par  value  only  to 
creditors  who  had  become  such  subsequently  to  the  increase 
of  capital  stock.  Brown,  J.,  in  the  opinion  of  the  court  said 
(p.  427)  : 

"Ever  since  the  case  of  Sawyer  v.  Hoag,  17  Wall.  610,  it 
has  been  the  settled  doctrine  of  this  court  that  the  capital 
stock  of  an  insolvent  corporation  is  a  trust  fund  for  the  pay- 
ment of  its  debts ;  that  the  law  implies  a  promise  by  the  orig- 
inal subscribers  of  stock  who  did  not  pay  for  it  in  money  or 
other  property  to  pay  for  the  same  when  called  upon  by 
creditors;  and  that  a  contract  between  themselves  and  the 
corporation  that  the  stock  shall  be  treated  as  fully  paid  and 
nonassessable,  or  otherwise  limiting  their  liability  therefor, 
is  void  as  against  creditors.  The  decisions  of  this  court  upon 
this  subject  have  been  frequent  and  uniform,  and  no  relax- 
ation of  the  general  principle  has  been  admitted.  Upton  v. 
Tribilcock,  91  U.  S.  45 ;  Sanger  v.  Upton,  91  U.  S.  56 ;  Webster 
v  Upton,  91  U.  S.  65 ;  Chubb  v.  Upton,  95  U.  S.  665 ;  Pullman 
V.  Upton,  96  U.  S.  328 ;  County  of  Morgan  v.  Allen,  103  U.  S. 
498 ;  Hawkins  v.  Glenn,  131  U.  S.  319 ;  Graham  v.  Railroad 
Co.,   102  U.   S.   148,   161;  Richardson  v.   Green,   134  U.  S. 

30.'.  .  .  . 

"If  the  corporation  has  no  right  as  against  creditors  to  sell 
or  dispose  of  this  stock  with  an  agreement  that  no  further 
assessment  shall  be  made  upon  it,  much  less  has  it  the  right 
to  give  it  away  or  distribute  it  among  shareholders  without 
receiving  a  fair  equivalent  therefor,  and  thereby  induce  the 
public  to  deal  with  it  upon  the  credit  of  such  shares  as  repre- 
senting the  assets  of  the  corporation Somewhat  dif- 
ferent considerations  apply  to  those  who  subscribe  for  the 
bonds  of  the  company  with  the  understanding  that  they  were 
to  receive  an  amount  of  stock  equal  to  the  bonds  as  an  addi- 
tional inducement  to  their  subscription The  case  then 

resolves  itself  into  the  question  whether  an  active  corpora- 
tion or,  as  it  is  called  in  some  cases,  a  'going  concern'  find- 
ing its  original  capital  impaired  by  loss  or  misfortune,  may 
not,  for  the  purpose  of  recuperating  itself  and  providingnew 
conditions  for  the  successful  prosecution  of  its  business,  issue 
new  stock,  put  it  upon  the  market,  and  sell  it  for  the  best 
price  that  can  be  obtained.  The  question  has  never  been 
directly  raised  before  in  this  court,  and  we  are  not  conse- 


105  STOCKHOLDERS.  §  125 

quently  embarrassed  by  any  previous  decisions  on  the  point. 
In  the  Upton  cases,  arising  out  of  the  failure  of  the  Great 
Western  Insurance  Company ,  in  Hatch  v.  Dana,  101  U.  S. 
205,  and  in  Hawkins  v.  Glenn,  131  U.  S.  319,  the  defendants 
were  either  original  subscribers  to  the  increased  stock  at  a 
price  far  below  its  par  value,  or  transferees  of  such  sub- 
scribers; and  the  stock  was  issued  not,  as  in  this  case,  to  pur- 
chase property  or  raise  money  to  add  to  the  plant,  and 
facilitate  the  operations  of  the  company,  but  simply  to  in- 
crease its  original  stock  in  order  to  carry  on  a  larger  busi- 
ness, and  the  stock  thus  issued  was  treated  as  if  it  formed 
a  part  of  the  original  capital.  In  County  of  Morgan  v.  Allen, 
103  U.  S.  498,  the  same  principle  was  applied  to  a  subscrip- 
tion by  a  county  to  the  capital  stock  of  a  railroad  company, 
for  which  it  had  issued  its  bonds,  although  such  bonds  had 
been  surrendered  to  the  county  with  the  consent  of  certain 
of  its  creditors. 

"To  say  that  a  corporation  may  not,  under  the  circum- 
stances above  indicated,  put  its  stock  upon  the  market  and 
sell  it  to  the  highest  bidder,  is  practically  to  declare  that  a 
corporation  can  never  increase  its  capital  by  a  sale  of  shares, 
if  the  original  stock  has  fallen  below  bar.  The  wholesome 
doctrine,  so  many  times  enforced  by  this  court,  that  the 
capital  stock  of  an  insolvent  corporation  is  a  trust  fund  for 
the  payment  of  its  debts,"  rests  upon  the  idea  that  the  cred- 
itors have  a  right  to  rely  upon  the  fact  that  the  subscribers 
to  such  stock  have  put  into  the  treasury  of  the  corporation, 
in  some  form,  the  amount  represented  by  it ;  but  it  does  not 
follow  that  every  creditor  has  a  right  to  trace  each  share  of 
stock  issued  by  such  corporation,  and  inquire  whether  its 
holder,  or  the  person  of  whom  he  purchased,  has  paid  its  par 
value  for  it.  It  frequently  happens  that  corporations,  as 
well  as  individuals,  find  it  necessary  to  increase  their  capital 
in  order  to  raise  money  to  prosecute  their  business  success- 
fully, and  one  of  the  most  frequent  methods  resorted  to  is 
that  of  issuing  new  shares  of  stock  and  putting  them  upon 
the  market  for  the  best  price  that  can  be  obtained ;  and  so 
long  as  the  transaction  is  bona  fide  and  not  a  mere  cover  for 
'watering'  the  stock,  and  the  consideration  obtained  repre- 
sents the  actual  value  of  such  stock,  the  courts  have  shown 
no  disposition  to  disturb  it.  Of  course,  no  one  would  take 
stock  so  issued  at  a  greater  price  than  the  original  stock 
could  be  purchased  for,  and  hence  the  ability  to  negotiate 
the  stock  and  to  raise  the  money  must  depend  upon  the  fact 
whether  the  purchaser  shall  or  shall  not  be  called  upon  to 
respond  for  its  par  value.     While,  as  before  observed,  the 


§§  126,  127  SUMMARY   OF    CORPORATION   LAW.  103 

precise  question  has  never  been  raised  in  this  court,  there  are 
numerous  decisions  to  the  effect  that  the  general  rule  that 
holders  of  stock  in  favor  of  creditors  mnst  respond  for  its  par 
value  is  subject  to  exceptions  where  the  transaction  is  not 

a  mere   cover  for  an  illegal   increase We   have  no 

doubt  the  learned  circuit  judge  held  correctly  that  it  was 
only  subsequent  creditors  who  were  entitled  to  enforce  their 
claims  against  these  stockholders,  since  it  is  only  they  who 
could  by  any  legal  presumption  have  trusted  the  company 
upon  the  faith  of  the  increased  stock.  First  National  Bank 
of  Deadwood  v.  Gustin  Minerva  Consolidated  Mining  Com- 
pany, 44  N.  W.  198;  2  Morawetz  on  Corporations,  §§  832-3; 
Coit  V.  N.  C.  Gold  Amalgamating  Co.,  14  Fed.  12.  We 
also  agree  with  him  that  creditors  who  became  such  after 
the  increase  was  voted  in  May,  1886,  are  entitled  to  look  to 
those  who  subsequently  received  the  stock,  notwithstanding 
the}^  did  not  receive  it  until  after  the  debts  had  been  con- 
tracted." 

§  126.  In  holding  that  individual  liability  of  stockholders 
over  and  above  stock  subscriptions  is  entirely  a  matter  of  stat- 
ute, Waite,  C.  J.,  in  Terry  v.  Little,  101  U.  S.  216,  said : 

"The  individual  liability  of  stockholders  in  a  corporation 
is  always  a  creature  of  statute.  It  does  not  exist  at  common 
law.  The  first  thing  to  be  determined  in  all  such  cases  is, 
therefore,  what  liability  has  been  created.  There  will  always 
be  difficulty  in  attempting  to  reconcile  cases  of  this  class  in 
which  the  general  question  of  remedy  has  arisen  unless  spe- 
cial attention  is  given  to  the  precise  language  of  the  statute 
under  consideration.  The  remedy  must  always  be  such  as  is 
appropriate  to  the  liability  to  be  enforced.  The  statute, 
which  creates  the  liability  may  declare  the  purposes  of  its 
creation  and  provide  direetlj'-  or  indirectly  a  remedy  for  its 
enforcement.  If  the  object  is  to  provide  a  fund  out  of  which 
all  creditors  are  to  be  paid  share  and  share  alike,  it  needs 
no  argument  to  show  that  one  creditor  should  not  be  per- 
mitted to  appropriate  to  himself,  without  regard  to  the  rights 
of  others,  that  which  is  to  make  up  the  fund." 

§  127.  In  holding  that  a  bank,  pledgee  of  stock  transferred 
into  its  name  on  the  books  of  the  corporation,  was  liable  as  a 
stockholder  and  could  not  evade  that  liability  by  having  the 
stock  transferred  to  a  dummy  on  the  books  of  the  company, 


107  STOCKHOLDERS.  §  127 

Strong,  J.,  in  National  Bank  v.  Case,  99  U.  S.  628,  said  (p. 
631): 

"Such  being  the  facts  of  the  case,  there  can  be  no  serious 
controversy  respecting  the  principles  of  law  applicable  to 
them.  It  is  thoroughly  established  that  one  to  whom  stock 
has  been  transferred  in  pledge  or  as  collateral  security  for 
money  loaned,  and  who  appears  on  the  books  of  the  corpora- 
tion as  the  owner  of  the  stock,  is  liable  as  a  stockholder  for 
the  benefit  of  creditors.  We  so  held  in  Pullman  v.  Upton, 
96  U.  S.  328 ;  and  like  decisions  abound  in  the  English  courts 
and  in  numerous  American  cases,  to  some  of  which  we  refer: 
Adderly  v.  Storm,  6  Hill  (N.  Y.),  624;  Roosevelt  v.  Brown, 
11  N.  Y.  148;  Ilolyoke  Bank  v.  Burnham,  11  Cush.  (Mass.) 
183;  Magruder  v.  Colston,  44  Md.  349;  Crease  v.  Babcock, 
10  Met.  (Mass.)  525;  Wheelock  v.  Kost,  77  111.  296;  Empire 
City  Bank,  18  N.  Y.  199 ;  Hale  v.  Walker,  31  Iowa,  344.  For 
this  several  reasons  are  given.  One  is,  that  he  is  estopped 
from  denying  his  liability  by  voluntarily  holding  himself  out 
to  the  public  as  the  owner  of  the  stock,  and  his  denial  of 
ownership  is  inconsistent  with  the  representations  he  has 
made;  another  is,  that  by  taking  the  legal  title  he  has  re- 
leased the  former  owner;  and  a  third  is,  that  after  having 
taken  the  apparent  ownership  and  thus  become  entitled  to 
receive  dividends,  vote  at  elections,  and  enjoy  all  the  privi- 
leges of  ownership,  it  would  be  inequitable  to  allow  him  to 
refuse  the  responsibilities  of  a  stockholder.  This  subject  is 
well  treated  in  Mr.  Thompson's  recently  published  work  on 
'The  liability  of  stockholders,'  where  may  be  found  not  only 
a  full  collection  of  authorities,  but  a  careful  analysis  of  what 
the  authorities  contain.     Vide,  e.  13. 

"When,  therefore,  the  stock  was  transferred  to  the  Ger- 
mania  Bank,  though  it  continued  to  be  held  merely  as  a  col- 
lateral security,  the  bank  became  subject  to  the  liabilities  of 
a  stockholder,  and  the  liability  accrued  the  instant  the  trans- 
fer was  made.  At  that  instant  the  liability  of  Phelps,  McCul- 
lough  &  Co.  ceased.  We  have,  then,  only  to  inquire  whether 
the  bank  succeeded  in  throwing  oif  that  liability  by  its  trans- 
fer to  its  clerk,  Waldo.  It  certainly  did  not  thereby  devest 
itself  of  its  substantial  ownership.  It  is  not  every  transfer 
that  releases  a  stockholder  from  his  responsibility  as  such. 
While  it  is  true  that  shareholders  of  the  stock  of  a  corpora- 
tion generally  have  a  right  to  transfer  their  shares,  and  thus 
disconnect  themselves  from  the  corporation  and  from  any 
responsibility  on  account  of  it,  it  is  equally  true  that  there 
are  some  limits  to  this  right.     A  transfer  for  the  mere  pur- 


§  128  SUMMARY   OP   CORPORATION   LAW.  108 

pose  of  avoiding  his  liability  to  the  company  or  to  its  cred- 
itors is  fraudulent  and  void,  and  he  remains  still  liable.     The 
English  cases,  it  is  admitted,  give  effect  to  such  transfers,  if 
they  are  made,  as  it  is  called,  'out-and-out';  that  is,  com- 
pletely, so  as  to  devest  the  transferrer  of  all  interest  in  the 
stock.     But  even  in  them  it  is  held  that  if  the  transfer  is 
merely  colorable,  or,  as  sometimes  coarsely  denominated,  a 
sham, — if,  in  fact,  the  transferee  is  a  mere  tool  or  nominee 
of  the  transferrer  so  that  as  between  themselves  there  has 
been  no  real  transfer,  'but  in  the  event  of  the  company  becom- 
ing prosperous  the  transferrer  would  become  interested  in  the 
profits,  the  transfer  will  be  held  for  naught  and  the  trans- 
ferrer will  be  put  upon  the  list  of  contributories.'     Williams' 
Case,  L.  R.  9  Eq.  225,  note,  where  the  transfer  was,  as  in  the 
present  case,  made  to  a  clerk  of  the  transferrer  without  con- 
sideration;  Payne's  Case,  Id.  223;  Kintrea's  Case,  L.  R.  5 
Ch.  9'5.     See,  also,  L-indley  on  Partnership,  2d  ed.,  p.  1352; 
Chinnock's  Case,  1  Johns.  Ch.  (Eng.)  714;  Hyam's  Case,  1 
De  Gex,  F.  &  J.  75 ;  Budd's  Case,  3  Id.  296.     The  American 
doctrine  is  even  more  stringent.     Mr.  Thompson  states  it 
thus,  and  he  is  supported  by  the  adjudicated  cases:  *A  trans- 
fer of  shares  in  a  failing  corporation  made  by  the  transferrer 
with  the  purpose  of  escaping  his  liability  as  a  shareholder,  to 
a  person  who  from  any  cause  is  incapable  of  responding  in 
respect  to  such  liability,  is  void  as  to  the  creditors  of  the 
company  and  as  to  other  shareholders,  although  as  between 
the    transferrer    and    the    transferee    it    was    out-and-out.' 
Nathan  v.  Whitlock,  9  Paige  (N.  Y.),  152;  McClaren  v.  Fran- 
ciseus,  43  Mo.  452 ;  Marcy  v.  Clark,  17  Mass.  329 ;  Johnson  v. 
Laflin,  by  Dillon,  J.,  6  Cent.  L.  J.  131." 

§  128.  In  holding  that  preferred  stockholders  who  had  be- 
come such  in  lieu  of  their  prior  position  as  creditors  had  no  lien 
or  claim  on  the  corporate  property  superior  to  that  of  cred- 
itors under  debts  contracted  by  the  company  subsequently  to 
the  issue  of  preferred  stock,  and  that  their  only  valid  claim 
was  one  to  a  priority  over  the  holders  of  common  stock, 
Blatchford,  J.,  in  Warren  v.  King,  108  U.  S.  389,  said  (p. 
396): 

"The  rights  of  the  holders  of  preferred  stock  in  this  case 
must  be  determined  by  the  language  of  the  stock  certificate. 
That  is  exactly  the  same  as  the  language  of  the  written  in- 
struments which  preceded  the  issuing  of  the  certificates. 
The  shares  are  shares  of  the  capital  stock  of  the  company, 


109  STOCKHOLDERS.  §  128 

though  shares  with  different  privileges  from  shares  of  the 
common  stock.  The  certificate  declares  the  quality  of  the 
preferred  stock  in  two  respects — (1)  its  relation  to  the  prop- 
erty of  the  company;  (2)  its  relation  to  the  net  earnings. 

"As  to  the  property,  it  is  declared  that  the  preferred  stock 
is  to  be  and  remain  a  first  claim  on  the  property  of  the  com- 
pany 'after  its  indebtedness.'  But  it  is  stock,  and  part  of 
the  capital  stock  with  the  characteristics  of  capital  stock. 
One  of  such  characteristics  is  that  no  part  of  the  property 
of  a  corporation  shall  go  to  reimburse  the  principal  of  capital 
stock  until  all  the  debts  of  the  corporation  have  been  paid. 
It  would  require  the  clearest  language  to  admit  of  the  ap- 
plication of  a  different  rule  to  any  capital  stock There 

is  a  unity  of  right  in  the  claim  of  the  preferred  stock  on 
the  property  of  the  company  and  in  the  title  of  its  holder 
to  receive  a  share  of  the  net  earnings  of  that  property.  His 
proprietorship  in  those  earnings  is  a  right  to  receive  from 
them  so  much  a  year,  if  earned,  before  the  common  stock  re- 
ceives any  dividend  therefrom.  And  when  the  two  classes 
of  stock  have  each  received  the  same  specified  amount  out 
of  the  year's  net  earnings,  he  has  the  right  to  share  equally 
in  the  surplus  with  the  holder  of  common  stock.  Thus  he 
can  have  no  income  on  his  stock  unless  there  are  net  earn- 
ings. Those  net  earnings  are  what  is  left  after  paying  cur- 
rent expenses  and  interest  on  debt  and  everything  else  which 
the  stockholders,  preferred  and  common,  as  a  body  corporate 
are  liable  to  pay.  The  holders  of  preferred  stock  have  the 
same  relation,  by  virtue  of  the  certificate,  to  the  corpus  of 
the  property  which  they  have  to  its  net  earnings.  Their 
position  in  regard  to  both  is  one  inferior  to  that  of  all  cred- 
itors  Whatever  position  the  holders  of  preferred  cer- 
tificates occupied  before  they  accepted  preferred  stock, 
whatever  special  rights  of  lien  they  had,  they  became  cor- 
porators, proprietors,  shareholders,  and  abandoned  the  posi- 
tion of  creditors,  and  took  up  toward  existing  and  future 
creditors  the  same  position  which  every  stockholder  in  a  cor- 
poration occupies  toward  existing  and  future  creditors.  His 
chance  of  gain,  by  the  operations  of  the  corporation,  throws 
on  him,  as  respects  creditors,  the  entire  risk  of  the  loss  of  his 
share  of  the  capital,  which  must  go  to  satisfy  the  creditors  in 
case  of  misfortune.  He  cannot  be  both  creditor  and  debtor 
by  virtue  of  the  ownership  of  stock.  In  this  case,  all  the  par- 
ties holding  trustees'  certificates  united  to  form  the  new  cor- 
poration and  converted  themselves  into  stockholders  in  it." 


^  129  SUMMARY   OP    CORPORATION   LAW,  110 

§  129,  In  holding  that  a  preferred  stockholder  was  not  en- 
titled to  dividends  until  "declared,"  nor  to  compel  a  declara- 
tion of  dividends  without  showing  abuse  of  discretion  by  the 
directors  of  the  corporation  in  failing  to  do  so,  Harlan,  J.,  in 
New  York  etc.  R.  R.  v.  Nickals,  119  U.  S.  296,  said  (p.  306)  : 

"A  declaration  of  profits,  as  in  itself  and  without  further 
action  by  the  directors,  entitling  shareholders  to  dividends 
is  unknown  in  the  law  or  practice  of  corporations.  Divi- 
dends are  'declared'  by  some  formal  act  of  the  corporation — 
the  question  whether  there  are  or  are  not  profits  being  set- 
tled entirely  by  the  accounts  of  the  company  as  kept  by  sub- 
ordinate officers,  not  by  the  mere  statement  of  directors  as 

to  what  appears  upon  its  books We  are  of  opinion 

that  while  the  agreement  of  1877  and  the  articles  of  associa- 
tion sustain  the  claim  of  preferred  stockholders  to  a  six  per 
cent  dividend  in  advance  of  common  stockholders,  the  former 
are  not  entitled,  of  right,  to  dividends,  payable  out  of  the 
net  profits  accruing  in  any  particular  year,  unless  the  direct- 
ors of  the  company  formally  declare,  or  ought  to  declare,  a 
dividend  payable  out  of  such  profits;  and  whether  a  divi- 
dend should  be  declared  in  any  year  is  a  matter  belonging 
in.  the  first  instance  to  the  directors  to  determine,  with  refer- 
ence to  the  condition  of  the  company's  property  and  affairs 
as  a  whole.  As  the  evidence  shows  that  the  profits  for  the 
year  ending  September  30,  1880,  were  applied  to  objects  that 
were  legitimate  and  proper,  and  as  the  condition  of  the  com- 
pany was  not  such  as  to  make  the  declaration  of  a  dividend 
a  duty  upon  the  part  of  the  directors,  we  perceive  no  ground 
upon  which  the  claim  of  the  appellees  can  be  sustained." 

In  holding  that  certain  preferred  stockholders  were  not 
in  a  position  to  question  the  validity  of  the  contract  in  ques- 
tion, Bradley,  J.,  in  Branch  v.  Jesup,  106  U.  S.  468,  said  (p. 
475): 

"The  appellants  are  stockholders  of  the  Atlantic  and  Gulf 
Railroad  Company.  Their  stock  is  a  preferred  stock,  it  is 
true,  entitling  them  to  interest  on  its  face  before  any  di^a- 
dends  can  be  made  to  the  common  stockholders.  But  this 
is  not  inconsistent  with  its  being  stock. 

"It  is  a  very  common  thing  in  this  country  to  issue  stock 
of  this  kind.  The  interest  accruing  thereon  is  in  the  nature 
of  a  preferred  dividend,  and  is  sometimes  so  called.  Though 
after  it  has  accrued  it  may  become  a  debt,  so  also  does  a 
dividend  become  a  debt  after  it  has  been  declared  and  has 


Ill  STOCKHOLDERS.  §  130 

become  payable.     It  has  no  priority  over  other  debts,  if,  in- 
deed, it  has  an  equality  with  them." 

§  130.  In  holding  that  stock  dividends,  i.  e.,  dividends  de- 
clared and  distributed  in  stock  of  the  company,  are  an  accre- 
tion to  the  principal,  not  the  income  of  an  estate  held  in  trust, 
Gray,  J.,  in  Gibbons  v.  Mahon,  136  U.  S.  549,  said  (p.  557)  : 

"The  distinction  between  the  title  of  a  corporation  and  the 
interest  of  its  members  or  stockholders  in  the  property  of  a 
corporation  is  familiar  and  well  settled.  The  ownership  of 
that  property  is  in  the  corporation  and  not  in  the  holders  of 
shares  of  its  stock.  The  interest  of  each  stockholder  con- 
sists in  the  right  to  a  proportionate  part  of  the  profits  when- 
ever dividends  are  declared  by  the  corporation  during  its 
existence  under  its  charter,  and  to  a  like  proportion  of  the 
property  remaining,  upon  the  termination  or  dissolution  of 
the  corporation  after  pavment  of  its  debts.  Van  Allen  v. 
Assessors,  3  Wall.  573,  584;  Delaware  Railroad  Tax,  18  Wall. 
306,  230;  Tennessee  v.  Whitworth,  117  U.  S.  129,  136;  New 
Orleans  v.  Houston,  119  U.  S.  265,  277.  Money  earned  by 
a  corporation  remains  the  property  of  the  corporation,  and 
does  not  become  the  property  of  the  stockholders  unless  and 
until  it  is  distributed  among  them  by  the  corporation.  The 
corporation  may  treat  it  and  deal  with  it  either  as  profits  of 
its  business  or  as  an  addition  to  its  capital.  Acting  in  good 
faith  and  for  the  best  interests  of  all  concerned,  the  corpora- 
tion may  distribute  its  earnings  at  once  to  the  stockholders 
as  income ;  or  it  may  reserve  part  of  the  earnings  of  a  pros- 
perous year  to  make  up  for  a  possible  lack  of  profits  in 
future  years;  or  it  may  retain  portions  of  its  earnings  and 
allow  them  to  accumulate,  and  then  invest  them  in  its  own 
works  and  plant,  so  as  to  secure  and  increase  the  permanent 
value  of  its  property.  Which  of  these  courses  shall  be  pur- 
sued is  to  be  determined  by  the  directors,  with  due  regard 
to  the  condition  of  the  company's  property  and  affairs  as  a 
whole ;  and,  unless  in  case  of  fraud  or  bad  faith  on  their 
part,  their  discretion  in  this  respect  cannot  be  controlled  by 
the  courts,  even  at  the  suit  of  owners  of  preferred  stock,  en- 
titled by  express  agreement  with  the  corporation  to  divi- 
dends at  a  certain  yearly  rate  'in  preference  to  the  payment 
of  any  dividend  on  the  common  stock,  but  dependent  on  the 
profits  of  each  particular  year  as  declared  by  the  board  of 
directors. '  New  York,  Lake  Erie  &  Western  R.  R.  v.  Nickals, 
119  U.  S.  296,  304,  307. 


§  130  SUMMARY   OF   CORPORATION   LAW.  112 

"Reserved  and  accumulated  earnings,  so  long  as  they  are 
held  and  invested  by  the  corporation,  being  part  of  its  cor- 
porate property,  it  follows  that  the  interest  therein,  repre- 
sented by  each  share,  is  capital  and  not  income  of  that  share 
as  between  the  tenant  for  life  and  the  remainderman,  legal 
or  equitable  thereof. 

"Whether  the  gains  and  profits  of  a  corporation  should 
be  so  invested  and  apportioned  as  to  increase  the  value  of 
each  share  of  stock,  for  the  benefit  of  all  persons  interested 
in  it,  either  for  a  term  of  life  or  of  years,  or  by  way  of  re- 
mainder in  fee,  or  should  be  distributed  and  paid  out  as 
income  to  the  tenant  for  life  or  for  years,  excluding  the  re- 
mainderman from  any  participation  therein,  is  a  question 
to  be  determined  by  the  action  of  the  corporation  itself  at 
such  times  and  in  such  manner  as  the  fair  and  honest  admin- 
istration of  its  whole  property  and  business  may  require  or 
permit,  and  by  a  rule  applicaisle  to  all  holders  of  like  shares 
of  its  stock;  and  cannot,  without  producing  great  embarrass- 
ment and  inconvenience,  be  left  open  to  be  tried  and  deter- 
mined by  the  courts  as  often  as  it  may  be  litigated  between 
persons  claiming  successive  interests  under  a  trust  created 
by  the  will  of  a  single  shareholder  and  by  a  distinct  and 
separate  investigation,  through  a  master  in  chancery  or 
otherwise,  of  the  affairs  and  accounts  of  the  corporation,  as 
of  the  dates  when  the  provisions  of  the  will  of  that  share- 
holder take  effect  and  with  regard  to  his  shares  only. 

"In  ascertaining  the  rights  of  such  persons  the  intention 
of  the  testator,  so  far  as  manifested  by  him,  must  of  course 
control;  but  when  he  has  given  no  special  direction  upon  the 
question  as  to  what  shall  be  considered  principal  and  what 
income,  he  must  be  presumed  to  have  had  in  view  the  lawful 
power  of  the  corporation  over  the  use  and  apportionment  of 
its  earnings,  and  to  have  intended  that  the  determination  of 
that  question  should  depend  upon  the  regular  action  of  the 
corporation  with  regard  to  all  its  shares. 

"Therefore,  when  a  distribution  of  earnings  is  made  by  a 
corporation  among  its  stockholders,  the  question  whether 
such  distribution  is  an  apportionment  of  additional  stock 
representing  capital  or  a  division  of  profits  and  income  de- 
pends upon  the  substance  and  intent  of  the  action  of  the  cor- 
poration as  manifested  by  its  vote  or  resolution;  and  ordi- 
narily a  dividend  declared  in  stock  is  to  be  deemed  capital, 
and  a  dividend  in  money  is  to  be  deemed  income  of  each 

share. 

"A  stock  dividend  really  takes  nothing  from  the  property 
of  the  corporation  and  adds  nothing  to  the  interests  of  the 


113  STOCKHOLDERS.  §  131 

shareholders.  Its  property  is  not  diminished  and  their  inter- 
ests are  not  increased.  After  such  a  dividend,  as  before,  the 
corporation  has  the  title  in  all  the  corporate  property;  the 
aggregate  interests  therein  of  all  the  shareholders  are  repre- 
sented by  the  whole  number  of  shares  and  the  proportional 
interest  of  each  shareholder  remains  the  same.  The  only 
change  is  in  the  evidence  which  represents  that  interest,  the 
new  shares  and  the  original  shares  together  representing  the 
same  proportional  interest  that  the  original  shares  repre- 
sented before  tlie  issue  of  new  ones." 

§  131.  In  holding  that  where  the  directors  of  a  bank  re- 
fused to  resist  the  collection  of  a  tax  imposed  on  the  bank  by 
the  state  in  violation  of  its  contract  with  the  bank,  an  individ- 
ual stockholder  in  a  suit,  making  the  bank,  its  directors  and  the 
tax  collector  parties  defendant,  was  entitled  to  an  injunction, 
Wayne,  J.,  in  Dodge  v.  Woolsey,  18  How.  (U.  S.)  331,  said 
(p.  341)  : 

**It  is  now  no  longer  doubted  either  in  England  or  the 
United  States  that  courts  of  equity,  in  both,  have  a  jurisdic- 
tion over  corporations,  at  the  instance  of  one  or  more  of  their 
members,  to  apply  preventive  remedies  by  injunction,  to  re- 
strain those  who  administer  them  from  doing  acts  which 
would  amount  to  a  violation  of  charters,  or  to  prevent  any 
misapplication  of  their  capitals  or  profits,  which  might  re- 
sult in  lessening  the  dividends  of  stockholders  or  the  value 
of  their  shares,  as  either  may  be  protected  by  the  franchises 
of  a  corporation,  if  the  acts  intended  to  be  done  create  what 
is  in  the  law  denominated  a  breach  of  trust.  And  the  juris- 
diction extends  to  inquire  into  and  to  enjoin,  as  the  case 
may  require  that  to  be  done,  any  proceedings  by  individuals 
in  whatever  character  they  may  profess  to  act  if  the  sub- 
ject of  complaint  is  an  imputed  violation  of  a  corporate  fran- 
chise or  the  denial  of  a  right  growing  out  of  it,  for  which 
there  is  not  an  adequate  remedy  at  law.  CunliflPe  v.  Man- 
chester and  Bolton  Canal  Co.,  2  Russ.  &  Mylne  Ch.  R.  480n ; 
Ware  v.  Grand  Junction  Water  Co.,  2  Russ.  &  Mylne,  470; 
Bayshaw  v.  Eastern  Counties  Ry.  Co.,  7  Harr.  Ch.  R. 
114;  Angell  &  Ames,  4th  ed.,  424,  and  the  other  cases  there 
cited 

"The  result  of  the  cases  is  well  stated  in  Angell  &  Ames, 
paragraphs  391,  393:  'In  cases  where  the  legal  remedy 
against  a  corporation  is  inadequate,  a  court  of  equity  will 

a 


§§  132,  133  SUMMARY   OF    CORPORATION    LAW.  114 

interfere,  is  well  settled,  and  there  are  cases  in  which  a  bill 
in  equity  will  lie  against  a  corporation  by  one  of  its  mem- 
bers.' 'Though  the  result  of  the  authorities  clearly  is,  that 
in  a  corporation,  when  acting  within  the  scope  of  and  in 
obedience  to  the  provisions  of  its  constitution,  the  will  of 
the  majority,  duly  expressed  at  a  legally  constituted  meeting, 
must  govern ,  yet  beyond  the  limits  of  the  act  of  incorpora- 
tion the  will  of  the  majority  cannot  make  an  act  valid;  and 
the  powers  of  a  court  of  equity  may  be  put  in  motion  at  the 
instance  of  a  single  shareholder,  if  he  can  show  that  the  cor- 
porations are  employing  their  statutory  powers  for  the 
accomplishment  of  purposes  not  within  the  scope  of  their 
institution.  Yet  it  is  to  be  observed  that  there  is  an  impor- 
tant distinction  between  this  class  of  cases  and  those  in  which 
tliere  is  no  breach  of  trust,  but  only  error  and  misapprehen- 
sion or  simple  negligence  on  the  part  of  the  directors.'  " 

§  132.  In  holding  that  the  corporation  must  be  made  party 
defendant  in  a  suit  by  a  stockholder  to  restrain  the  collection 
of  a  tax,  and  on  that  ground  sustaining  the  demurrer  to  the 
bill,  Davis,  J.,  in  Davenport  v.  Dows,  18  Wall.  626,  said: 

"That  a  stockholder  may  bring  a  suit  when  a  corporation 
refuses  is  settled  in  Dodge  v.  Woolsey,  but  such  a  suit  can 
only  be  maintained  on  the  ground  that  the  rights  of  the  cor- 
poration are  involved.  These  rights  the  individual  sliare- 
holder  is  allowed  to  assert  in  behalf  of  himself  and  associates, 
because  the  directors  of  the  corporation  decline  to  take  the 
proper  steps  to  assert  them.  Manifestly,  the  proceedings  for 
this  purpose  should  be  so  conducted  that  any  decree  which 
shall  be  made  on  the  merits  shall  conclude  the  corporation. 
This  can  only  be  done  by  making  the  corporation  a  party 
defendant.  The  relief  asked  is  on  behalf  of  the  corporation, 
not  the  individual  shareholder,  and  if  it  be  granted,  the  com- 
plainant derives  only  an  incidental  benefit  from  it.  It  would 
be  wrong,  in  case  the  shareholder  were  unsuccessful,  to  allow 
the  corporation  to  renew  the  litigation  in  another  suit  involv- 
ing precisely  the  same  subject  matter.  To  avoid  such  a  re- 
sult a  court  of  equity  will  not  take  cognizance  of  a  bill 
brought  to  settle  a  question  in  which  the  corporation  is  the 
essential  party  in  interest,  unless  it  is  made  a  party  to  the 
litigation." 

§  133.  In  holding  that  there  must  be  a  real  persistent  re- 
fusal to  perform  their  duty  or  wrong  done  to  the  corporation 


115  STOCKHOLDERS.  §  133 

in  order  to  justify  a  stockholder  in  bringing  suit  in  lieu  of  a 
corporation  to  enforce  a  corporate  right  against  a  third  party, 
Miller,  J.,  in  Hawes  v.  Oakland,  104  U.  S.  450,  said  (p.  452)  : 

"Since  the  decision  of  this  court  in  Dodge  v.  Woolsey  (18 
How.  331),  the  principles  of  which  have  received  more  than 
once  the  approval  of  this  court,  the  frequency  with  w^hich  the 
most  ordinary  and  usual  chancery  remedies  are  sought  in 
the  federal  courts  by  a  single  stockholder  of  a  corporation 
who  possesses  the  requisite  citizenship  in  cases  where  the 
corporation  whose  rights  are  to  be  enforced  cannot  sue  in 
those  courts  seems  to  justify  a  consideration  of  the  grounds 
on  which  that  case  was  decided  and  of  the  just  limitation  of 
the  exercise  of  those  principles That  the  vast  and  in- 
creasing proportion  of  the  active  business  of  modern  life 
which  is  done  by  corporations  should  call  into  exercise  the 
beneficent  powers  and  flexible  methods  of  courts  of  equi-ty 
is  neither  to  be  wondered  at  nor  regretted;  and  this  is  espe- 
cially true  of  controversies  growing  out  of  the  relations  be- 
tween the  stockholder  and  the  corporation  of  which  he  is  a 
member.  The  exercise  of  this  power  in  protecting  the  stock- 
holder against  the  frauds  of  the  governing  body  of  directors 
or  trustees  and  in  preventing  their  exercise,  in  the  name  of 
the  corporation,  of  powers  which  are  outside  of  their  charters 
or  articles  of  association,  has  been  frequent,  and  is  most  bene- 
ficial and  is  undisputed.  These  are  real  contests,  however, 
between  the  stockholder  and  the  corporation  of  which  he  is 
a  member 

"The  principle  involved  in  the  case  of  Dodge  v.  Woolsey 
permits  the  stockholder  in  one  of  these  corporations  to  step 
in  betAveen  that  corporation  and  the  party  with  whom  it  has 
been  dealing,  and  institute  and  control  a  suit  in  which  the 
rights  involved  are  those  of  the  corporation,  and  the  contro- 
versy is  one  really  between  that  corporation  and  the  other 
party,  each  being  entirely  capable  of  asserting  its  own  rights. 
This  is  a  very  different  affair  from  a  controversy  between 
the  shareholder  of  a  corporation  and  that  corporation  itself 
or  its  managing  directors  or  trustees,  or  the  other  share- 
holders, who  may  be  violating  his  rights  or  destroj'ing  the 
property  in  which  he  has  an  interest.  Into  such  a  contest 
the  outsider,  dealing  with  the  corporation  through  its  man- 
aging agents  in  a  matter  within  their  authority,  cannot  be 
dragged,  except  where  it  is  necessary  to  prevent  an  absolute 
failure  of  justice  in  eases  which  have  been  recognized  as  ex- 
ceptional in  their  character  and  calling  for  the  extraordinary 


§  133  SUMMARY   OF    CORPORATION   LAW.  116 

powers  of  a  court  of  equity.  It  is  therefore  always  a  ques- 
tion of  equitable  jurisprudence,  and  as  such  has  within  the 
last  forty  years  received  the  repeated  consideration  of  the 
highest  courts  of  England  and  of  this  country 

"This  examination  of  Dodge  v.  Woolsey  satisfies  us  that 
it  does  not  establish,  nor  was  it  intended  to  establish,  a  doc- 
trine on  this  subject  different  in  any  material  respect  from 
that  found  in  the  cases  in  the  English  and  in  other  American 
courts,  and  that  the  recent  legislation  of  Congress  referred 
to  leaves  no  reason  for  any  expansion  of  the  rule  in  that  case 
beyond  its  fair  interpretation. 

"We  understand  that  doctrine  to  be  that  to  enable  a  stock- 
holder in  a  corporation  to  sustain  in  a  court  of  equity,  in  his 
owTi  name,  a  suit  founded  on  a  right  of  action  existing  in  the 
corporation  itself,  and  in  which  the  corporation  itself  is  the 
appropriate  plaintiff,  there  must  exist  as  the  foundation  of 
the  suit  some  action  or  threatened  action  of  the  managing 
board  of  directors  or  trustees  of  the  corporation  which  is 
beyond  the  authority  conferred  on  them  by  their  charter  or 
other  source  of  organization ;  or  such  a  fraudulent  transac- 
tion completed  or  contemplated  by  the  acting  managers  in 
connection  with  some  other  party,  or  among  themselves  or 
with  other  shareholders,  as  will  result  in  serious  injury  to 
the  corporation  or  to  the  interests  of  the  other  shareholders; 
or  where  the  board  of  directors  or  a  majority  of  them  are 
acting  for  their  own  interest,  in  a  manner  destructive  of 
the  corporation  itself  or  of  the  rights  of  the  other  share- 
holders; or  where  the  majority  of  shareholders  themselves 
are  oppressively  and  illegally  pursuing  a  course  in  the  name 
of  the  corporation,  which  is  in  violation  of  the  rights  of  the 
other  shareholders,  and  which  can  only  be  restrained  by  the 
aid  of  a  court  of  equity. 

"Possibly  other  cases  may  arise  in  which  to  prevent  ir- 
remediable injury,  or  a  total  failure  of  justice,  the  court 
would  be  justified  in  exercising  its  powers,  but  the  foregoing 
may  be  regarded  as  an  outline  of  the  principles  which  govern 
this  class  of  cases. 

"But,  in  addition  to  the  existence  of  grievances  which  call 
for  this  kind  of  relief,  it  is  equally  important  that  before 
the  shareholder  is  permitted  in  his  own  name  to  institute  and 
conduct  a  litigation  which  usually  belongs  to  the  corpora- 
tion, he  should  show  to  the  satisfaction  of  the  court  that  he 
has  exhausted  all  the  means  within  his  reach  to  obtain,  within 
the  corporation  itself,  the  redress  of  his  grievances  or  action 
in  conformity  with  his  wishes.     He  must  make  an  earnest, 


117  STOCKHOLDERS.  §  134 

not  a  simulated,  effort,  with  the  managing  body  of  the  cor- 
poration, to  induce  remedial  action  on  their  part,  and  this 
must  be  made  apparent  to  the  court.  If  time  permits  or  has 
permitted,  he  must  show,  if  he  fails  with  the  directors,  that 
he  has  made  an  honest  effort  to  obtain  action  by  the  stock- 
holders as  a  body  in  the  matter  of  which  he  complains ;  and 
he  must  show  a  case,  if  this  is  not  done,  where  it  could  not 
be  done  or  it  was  not  reasonable  to  require  it. 

"The  efforts  to  induce  such  action  as  complainant  desires 
on  the  part  of  the  directors,  and  of  the  shareholders  when 
that  is  necessary,  and  the  cause  of  failure  in  these  efforts, 
should  be  stated  with  particularity,  and  an  allegation  that 
complainant  was  a  shareholder  at  the  time  of  the  transactions 
of  which  he  complains,  or  that  his  shares  have  devolved  on 
him  since  by  operation  of  law,  and  that  the  suit  is  not  a  collu- 
sive one  to  confer  on  a  court  of  the  United  States  jurisdiction 
in  a  case  of  which  it  could  otherwise  have  no  cognizance, 
should  be  in  the  bill,  which  should  be  verified  by  affidavit." 

§  134.  In  stating  the  position  of  stockholders  and  bond- 
holders occupying  the  position  of  promoters,  Brown,  J.,  in 
Dickerman  v.  Northern  Trust  Co.,  176  U.  S.  181,  said  (p.  203)  : 

"Somewhat  different  considerations  apply  to  those  who 
took  part  in  the  organization  of  the  company  and  in  the 
purchase  of  the  thirty-nine  mills,  and  who  received  the 
bonds  and  stock  of  the  paper  company  with  notice  of  the 
fraudulent  character  of  the  scheme.  We  are  not  disposed 
to  condone  the  offenses  of  those  who,  through  Beard  and 
Ramsdell  and  their  assignee  Stein,  as  their  agents,  purchased 
these  plants  for  $2,788,000,  and  immediately  thereafter  went 
through  the  form  of  repurchasing  of  their  own  agents  (in 
fact,  of  themselves)  the  same  properties  at  $5,000,000. 
These  men  stood  in  the  light  of  promoters  of  the  Straw 
Paper  Company.  A  promoter  is  one  who  'brings  together 
the  persons  v/ho  become  interested  in  the  enterprise,  aids 
in  procuring  subscriptions  and  sets  in  motion  the  machinery 
which  leads  to  the  formation  of  the  corporation  itself.' 
Cook  on  Stock  and  Stockholders,  see.  661.  Or,  as  defined 
by  the  English  statute  of  7  &  8  Vict.,  chapter  110,  section  3, 
'Every  person  acting  by  whatever  name  in  the  forming  and 
establishing  of  a  company  at  any  period  prior  to  the  com- 
pany' becoming  fully  incorporated.  See,  also,  Lloyd  on 
Corporate  Liability  for  Acts  of  Promoters,  17.  He  is  treated 
as  standing  in  a  confidential  relation  to  the  proposed  com- 
pany, and  i^  bound  to  the  exercise  of  the  utmost  good  faith. 


§  135  SUMMARY    OF    COKPORATION    LAW.  118 

Lloyd's  Corporate  Liability;  18;  Densmore  Oil  Co.  v.  Dens- 
more,  64  Pa.  43;  Bosher  v.  Land  Co.,  89  Va.  455.  The  pro- 
moter is  the  agent  of  the  corporation  and  sulDJect  to  the 
disabilities  of  an  ordinary  asrent.  His  acts  are  scrutinized 
carefully,  and  he  is  precluded  from  taking  a  secret  advan- 
tage of  the  other  stockholders.  Cook  on  Stock  and  Stock- 
holders, sec.  651.  'Accordingly,  it  has  been  held  that,  if  per- 
sons start  a  company,  and  induce  others  to  subscribe  for 
shares,  for  the  purpose  of  selling  property  to  the  company 
when  organized,  they  must  faithfully  disclose  all  facts  relat- 
ing to  the  property  which  would  influence  those  who  form 
the  company  in  deciding  upon  the  judiciousness  of  the  pur- 
chase. If  the  promoters  are  guilty  of  any  misrepresenta- 
tion of  facts,  or  suppression  of  the  truth  in  relation  to  the 
character  and  value  of  the  property  or  their  personal  in- 
terest in  the  proposed  sale,  the  company  will  be  entitled  to 
set  aside  the  transaction  or  recover  compensation  for  any 
loss  which  it  has  suffered.'  Morawetz  on  Corporations,  sees. 
291,  294,  546;  New  Sombrero  Phosphate  Co.  v.  Erlanger,  5 
Ch.  Div.  73;  Bagnall  v.  Carlton,  6  Ch.  Div.  371;  Emma  Silver 
Mining  Co.  v.  Grant,  11  Ch.  Div.  918. 

"  *In  those  cases  where  the  scheme  of  organization  gives 
the  promoters  the  power  of  selecting  the  directors  who  are 
to  represent  the  company  in  the  proposed  purchase,  they 
are  bound  to  select  competent  and  trustworthy  persons  who 
will  act  honestly  in  the  interest  of  the  shareholders.  A  pur- 
chase made  from  the  promoters  under  these  circumstances 
■will  not  bind  the  company  unless  it  was  a  fair  and  honest 
bargain.'  Morawetz  on  Corporations,  sec.  546;  The  New 
Sombrero  Phosphate  Co.  v.  Erlanger,  L.  R.  5  Ch.  Div.  73; 
Brewster  v.  Hatch,  122_N.  Y.  349;  Simons  v.  Vulcan  Oil  & 
Mining  Co.,  61  Pa.  202;  Twycross  v.  Grant,  L.  R.  2  C.  P. 
Div.  469,  503;  Whalev  Bridge  Calico  Printing  Co.  v.  Green, 
L.  R.  5  Q.  B.  Div.  109,  111 ;  Thompson  on  Liability  of  0.  & 
A.  218,  sec.  20." 


VOTING  BY  PROXY   AND  VOTING   TRUSTS. 

§  135.  The  charter  of  a  corporation,  whether  general  or 
special,  is  a  regulation  of  status,  and  the  incorporators,  by  ac- 
cepting the  franchise  in  the  particular  instance,  adopt  the 
status  thereby  conferred.  This  new  status  thus  adopted  car- 
ries with  it  both  rights  and  duties  of  the  several  individuals  in 
relation  to  each  other  and  to  the  corporation.     Of  the  most  im- 


119  STOCKHOLDERS.  §  136 

portant  is  the  right  and  duty  to  participate  in  the  control  and 
management  of  the  corporation  by  voting  in  elections  of  officers 
and  upon  the  adoption  of  measures.  This  is  clearly  apparent 
to  all  in  the  case  of  a  public  or  political  corporation.  It  is 
none  the  less  true  in  the  case  of  a  corporation  for  economic 
as  distinguished  from  political  purposes — in  the  nature  of 
things,  not  less  true  of  an  incorporated  business  concern  than 
of  a  municipality. 

§  136.  It  is  of  some  considerable  importance  to  bear  this  in 
mind,  for  the  fact  is  often  lost  to  view  that  a  stockholder  in  a 
corporation  has  anything  more  than  an  ordinary  propertj^  in- 
terest therein,  which  he  is  at  liberty  to  deal  with  as  suits  his 
pleasure.  To  be  sure,  as  any  valuable  interest  may  be  con- 
sidered property,  so  may  the  stockholder's  status  and  interest 
in  the  corporation,  but  it  is  a  peculiar  property,  a  participa- 
tion in  the  corporate  franchise,  carrying  with  it  duties  as  well 
as  rights.  Of  these  the  most  im^portant  is  that  of  voting, 
which  is  both  a  right  and  a  duty,  not  to  be  regarded  purely 
from  the  standpoint  of  the  individual  concerned.  The  con- 
trol of  the  corporation  is  in  the  majority  of  the  individual 
units,  and  thus  the  exercise  of  discretion  by  the  individual  is 
a  contributing  factor,  important  to  himself  and  to  all  the  in- 
dividuals concerned  in  the  corporation.  This  power  of  vot- 
ing, both  in  the  public  and  private  corporation,  is  a  delegated 
power  of  discretion,  and  must  be  personally  exercised  on  the 
principle,  "Delegata  potestas  non  potest  delegari." 

This  rule  has  been  strictly  adhered  to  in  public  corpora- 
tions, and  the  citizen  can  lawfully  vote  in  a  municipal  elec- 
tion only  in  person.  The  reasons  for  the  rule  in  the  public 
corporation  apply  with  equal,  if  not  greater,  force  in  case  of 
the  private  business  corporation,  where  the  stockholder  always 
has  a  stake  in  the  successful  conduct  of  the  corporation,  which 
is  not  universally  true  of  citizen  voters.  In  the  long  run, 
the  judgment  of  the  few  has  been  found  by  experience  to 
be  inferior  to  that  of  the  many,  and  in  municipal  and  city 
governments  oligarchies  have  been  replaced  by  democracies, 
founded  principally  on  an  inalienable  right  of  franchise  in  the 
citizen  voter. 


§§  137,  138  SUMMARY   OF   CORPORATION  LAW.  120 

§  137.  At  the  common  law,  voting  by  proxy  was  no  more 
recognized  or  permitted  in  the  private  corporation  than  in  the 
public  corporation,  but  the  rule  was  relaxed  by  the  courts, 
and  finally  the  various  state  legislatures  expressly  authorized 
stockholders  in  private  corporations  to  vote  by  proxy.  As  a 
consequence,  voting  by  proxy  is  now  very  general  in  the 
larger  corporations,  and  with  the  voting  trusts  has  resulted 
in  the  control  of  the  business  corporations  being  wrested  away 
from  the  real  stockholders  into  the  hands  of  little  oligarchies 
of  manipulating  financiers. 

In  Taylor  v.  Griswold  (1834),  14  N.  J.  L.  223,  it  was  held 
that  a  by-law  authorizing  voting  by  proxy  was  void,  and  that 
each  stockholder  was  entitled  to  one  vote  and  no  more.  Horn- 
blower,  C.  J.,  said: 

''When  the  Crown  creates  a  corporation,  it  grants  to  it  by 
implication  all  powers  that  are  necessary  for  carrying  into 
effect  the  object  for  which  it  was  created.  This  is  according 
to  the  legal  principle  expressed  in  the  maxim,  'Qui  coneedit 
aliquid  concedere  videtur  et  id,  sine  quo  res  ipsa  non  potest.' 
11  Co.  52.  It  is  therefore  incidental  to  every  corporation  to 
have  the  power  of  making  by-laws,  regulations  and  ordinances 
relative  to  the  purposes  for  which  it  was  instituted.  Sutton's 
IIosp.  Case,  10  Co.  31b;  Norris  v.  Stapps,  Hob.  211;  City  of 
London  v.  Vanacker,  1  Ld.  Raym.  496;  Rex  v.  Westwood, 
7  Bing.  1;  S.  C,  20  Eng.  Com.  Law  Rep.  1159;  Company 
of  Feltmakers  v.  Davis,  1  Bos.  &  Pul.  100;  Rex  v.  Lyme  Regis, 
Doug.  158.  But  this  incidental  power  of  legislation  is  lim- 
ited not  only  by  the  terms  of  the  charter  according  to  the 
maxim,  'Expressum  facit  cessare  tacitum'  (Co.  Lit.  210a), 
but  by  the  spirit  and  design  of  the  charter,  the  purpose  for 
which  it  was  created,  the  object  which  the  crown  or  the 
legislature  had  in  view,  and  the  general  principles  and  policy 
of  the  common  law.  Angell  &  Ames  on  Corporations,  184, 
and  cases  there  cited.  Sutton's  Hosp.  Case,  10  Co.  30;  Child 
V.  Hudson  Bay  Co.,  2  P.  Wms.  207 ;  People  v.  Utica  Ins.  Co., 
15  Johns.  383;  FiremiCn's  Ins.  Co.  v.  Ely,  2  Cow.  699;  People 
v.  Tibbits  et  al.,  2  Cow.  358 ;  People  v.  Kip  et  al.,  4  Cow.  382, 
note;  Angell  &  Ames  on  Corporations,  188,  sec.  4. 

§  138.  "If,  in  view  of  these  first  and  elementary  principles, 
we  repeat  the  question  whether  the  right  to  make  a  by-law  dis- 
pensing with  the  personal  attendance  of  members  and  permit- 
ting them  to  appear  and  vote  by  proxy  is  incident  to  a  cor- 


121  STOCKHOLDERS.  §  138 

poration,  the  answer  must  be  in  the  negative.  Such  a  power 
is  not  essential,  nor  even  apparently  necessary,  to  carry  into 
effect  the  objects  for  which  corporations  are  generally  created. 
If  the  question  is  again  asked  in  reference  to  this  particular 
corporation,  the  same  answer  must  be  given,  and  more  em- 
phatically for  the  same  reason.  'The  true  test  of  all  by-laws,' 
says  Mr.  Justice  Wilmot,  'is  the  intention  of  the  crown  in 
granting  the  charter  and  the  apparen-t  good  of  the  corpora- 
tion.' Rex  V.  Spencer,  3  Burr.  Rep.  1838.  What,  then,  was 
the  object  and  design  of  the  legislature  in  creating  this  corpo- 
ration? That  it  was  not  for  the  purpose  of  instituting  a  stock 
company  merely  or  principally  for  the  acquisition  of  prop- 
erty will  appear  in  the  sequel  of  this  investigation.  But  it 
was  to  enable  the  owners  or  lessees  of  certain  existing  prop- 
erty, in  the  preservation  and  good  management  of  which  the 
public  had  a  deep  and  important  interest,  to  adopt  such 
measure  as  would  give  permanency  and  security  to  the  insti- 
tution and  be  calculated  to  promote  their  own  and  the  public 
benefit.  If,  from  the  nature  of  things,  this  charter  would 
be  inoperative,  or  in  any  measure  fail  to  effect  or  secure  the 
benign  objects  the  legislature  had  in  view,  unless  we  annex  to 
it  the  power  of  making  such  a  by-law  as  the  one  under  con- 
sideration, then  it  follows  that  the  corporation  has  the  power 
by  implication  and  as  an  incident  to  the  charter.  But  that 
the  right  of  voting  by  proxy  is  essential  to  the  attainment  of 
the  object  and  design  of  the  charter  will  not  be  seriously  pre- 
tended. If  we  test  the  validity  of  the  by-law  in  question,  or 
the  incidental  right  of  the  corporation  to  make  it,  by  the 
latter  branch  of  the  rule  just  quoted,  viz.,  'the  apparent  good 
of  the  corporation,'  the  claim  will  be  found  equally  unten- 
able. It  may  be  for  the  personal  convenience  of  members,  but 
it  cannot  be  for  the  good  of  the  corporation,  that  its  business 
or  election  should  be  conducted  by  proxies.  The  interest  of 
the  company,  the  good  of  the  public,  would  be  better  promoted 
and  more  effectually  secured  by  the  personal  attendance  of, 
and  mutual  interchange  of,  opinions  among  the  members  than 
by  the  action  of  proxies.  At  least,  this  is  the  fair  and  legal 
presumption.  If  one  member  may  appear  and  vote  by  proxy 
at  elections  and  on  other  matters  of  vital  importance  to  the 
institution,  then  all  may,  and  so  the  welfare  and  interest  of 
the  company  and  the  public  be  utterly  neglected.  In  short, 
so  far  from  its  being  incident  to  a  corporation  to  make  such 
a  regulation,  it  is  at  variance  with  the  spirit  and  'with  the 
fundamental  principles  of  our  civil  and  political  institutions.' 
And  it  is  confidently  believed  that  not  an  authority  can  be 
found  nor  a  case  produced  in  support  of  the  position  that  the 


§  139  SUMMARY    OF    CORPORATION    LAW.  122 

right  of  miaking  such  a  by-law  is  incident  to  a  corporation  of 
any  description,  public  or  private.  Speculations  upon  the 
evil  consequences  that  have  resulted  to  many  of  our  incorpo- 
rated institutions,  and  especially  to  our  banks,  by  this  and 
other  innovations  upon  the  salutary  principles  and  rules  of 
the  common  law  do  not  become  this  place  or  occasion ;  but  may 
well  deserve  the  grave  consideration  of  another  department 
of  the  government." 

§  139.  And  upon  the  question  whether  one  member  or 
stockholder  was  entitled  to  more  than  one  vote : 

"The  charter,  if  not  in  terms,  yet  in  its  spirit  and  legal  in- 
tendment, gives  each  member  the  same  rights  and  consequently 
but  one  vote  ;  whereas  this  by-law  gives  them  unequal  rights  and 
an  unequal  number  of  votes.  It  makes  one  a  member  for  one 
purpose  and  another  a  member  for  another  purpose.  It  im- 
poses a  test  or  qualification  unkno\ra  to  the  charter,  by  which 
to  determine  how  many  votes  a  member  may  give — whether 
one,  five,  ten  or  fifty.  In  short,  a  by-law  excluding  a  member 
from  office,  or  from  the  right  to  vote  at  all  unless  he  owns  five 
or  ten  or  twenty  shares,  would  not  be  a  more  palpable,  though 
it  might  be  a  more  flagrant,  violation  of  the  charter.  A  man 
with  one  share  is  as  much  a -member  as  a  man  with  fift}';  and 
it  is  difficult  to  perceive  any  substantial  difference  between  a 
by-law  excluding  a  member  with  one  share  from  voting  at  all 
and  a  by-law  reducing  his  one  vote  to  a  cipher,  by  giving 
another  member  fifty  or  a  hundred  votes. ' ' 

Again  :  "Finally,  the  by-law  in  question  is  not  authorized  by 
the  charter;  is  inconsistent  with  the  popular  spirit  and  design 
of  the  institution ;  is  not  essential  or  necessary  to  effect  the  ob- 
ject the  legislature  had  in  view;  is  contrary  to  the  great  prin- 
ciples and  policy  of  our  laws ;  and  is  not  even  for  the  apparent 
good  of  the  company  itself.  It  is  therefore  void.  The  object 
of  the  legislature  was  to  give  permanency  and  protection  to  the 
public  improvements  that  had  been  erected,  and  security  to 
the  individuals  who  had  embarked  in  the  enterprise.  Instead 
of  promoting  and  securing  these  legitimate  designs,  the  tend- 
ency— at  least  the  apparent  tendency — of  the  by-law  in  ques- 
tion is  to  encourage  speculation  and  monopoly,  to  lessen  the 
rights  of  the  smaller  stockholders,  depreciate  the  value  of 
their  shares,  and  throw  the  whole  property  and  government 
of  the  company  into  the  hands  of  a  few  capitalists;  and  it 
may  be  to  the  utter  neglect  or  disregard  of  the  public  con- 
venience and  interest.  I  do  not  say  that  such  was  the  design, 
or  that  such  has  been  the  effect,  but  only  that  the  natural  or 


123  STOCKHOLDERS.  §  140 

probable  tendency  of  the  by-law  in  question  is  to  produce  such 
a  result."  (Pemberton  v.  Allen,  Davis  Rep.  116  (Eng. 
1607),  Attorney  General  v.  Scott,  1  Ves.  413  (Lord  llard- 
wicke,  1750),  Phi-llips  v.  Wickham,  1  Paige  Rep.  590  (Ch. 
Walworth,  N.  Y.),  cited  in  support;  State  v.  Tudor,  5  Day's 
Rep.  (Conn.)  contra.) 

§  140.  Craig  v.  First  Presbyterian  Church  (1878),  88  Pa. 
42 :  The  right  of  voting  at  an  election  of  an  incorporated  com- 
pany by  proxy  is  not  a  general  right,  and  the  party  who  claims 
it  must  show  a  special  authority  for  that  purpose  (citing  Tay- 
lor V.  Griswold). 

People  V.  Twaddell  (1879),  18  Hun,  427:  Held,  following 
Phillipsi  V.  Wickham,  that  the  right  of  voting  by  proxy  is  not 
a  general  right,  and  the  party  who  claims  it  must  show  a  spe- 
cial authority  for  that  purpose. 

Commionwealth  v.  Bringhurst  (1883),  103  Pa.  134:  Mem- 
bers of  a  corporation  may  not  vote  by  proxy  unless  author- 
ized by  charter  or  by-law. 

McKee  v.  Home  Savings  &  Trust  Co.  (1904),  122  Iowa,  731 : 
Held,  that  a  stockholder  could  vote  by  proxy  only  when  au- 
thorized by  statute,  articles  or  by-laws,  and  then  only  upon 
matters  specified  in  the  proxy. 

In  Detwiller  v.  Commonwealth  (1890),  131  Pa.  614,  in 
holding  that  in  absence  of  statute  a  by-law  allowing  one  vote 
for  every  ten  shares  and  also  voting  by  proxy  is  reasonable 
and  binding,  Williams,  J.,  citing  no  cases,  said: 

"A  corporation  is  a  voluntary  association  of  persons  en- 
gaged in  a  common  enterprise.  When  the  methods  of  voting 
are  not  fixed  by  general  law,  the  corporators  may  make  the 
law  for  themselves,  subject  to  the  qualification  that  such  laws 
and  regulations  as  they  make  shall  not  conflict  with  the  laws 
of  the  state  or  of  the  United  States.  The  general  law  did  not 
touch  either  of  the  questions  now  raised,  and  for  that  reason 
the  corporators  or  stockholders  took  them  up  and  made  a 
law  for  themselves  covering  both  subjects.  They  have  pro- 
vided that  stockholders  shall  have  one  vote  for  each  share 
held  by  them  up  to  ten  shares,  and  they  have  fixed  the  pro- 
portion which  his  votes  shall  bear  to  his  shares  above  that 
number.  This  is  a  reasonable  regulation.  It  is  uniform  in 
its  action,  it  conflicts  with  no  law,  and  it  is  binding  on  all  the 


§  141  SUMMARY   OF   CORPORATION   LAW.  124 

shareholders.     The  same  thing  may  be  said  in  regard  to  voting 
by  proxy." 

In  People  v.  Crossley  (1873),  69  111.  195,  where  the  charter 
of  a  benevolent  society  authorized  the  society  to  elect  its 
"directors  or  managers  at  such  time  and  place  and  in  such 
manner  as  may  be  specified  in  its  by-laws,"  held,  a  by-law 
authorizing  voting  by  proxy  valid.  Sheldon,  J.,  in  delivering 
the  opinion  of  the  court,  said,  after  stating  the  decisions  in 
Taylor  v.  Griswold  and  The  State  v.  Tudor : 

"The  rule  of  the  latter  case  appears  to  be  one  promotive 
of  convenience,  and  has  to  recommend  it  that  it  allows  mem- 
bers of  a  private  corporation  instituted  for  merely  private 
purposes  to  regulate  their  manner  of  voting  in  a  way  to  suit 
their  own  sense  of  convenience  and  interest.  In  view  of  the 
statutory  authority  to  elect  the  directors  in  such  manner  as 
might  be  specified  in  the  by-laws  of  the  society,  we  are  disposed 
to  concur  with  the  latter  authority  above  cited,  and  hold  the 
by-law  authorizing  the  voting  by  proxy  in  elections  to  be 
valid,  especially  so  in  view  of  section  3,  article  II  of  the 
present  constitution  of  the  state,  which  directs  that  'The  Gen- 
eral Assembly  shall  provide  by  law,  that  in  all  elections  for 
directors  or  managers  of  incorporated  companies,  every  stock- 
holder shall  have  the  right  to  vote  in  person  or  by  proxy,  for 
the  number  of  shares  of  stock  owned  by  him  for  as  many  per- 
sons as  there  are  directors  or  managers  to  be  elected  or  to 
cumulate  said  shares.'  " 

In  Market  St.  Ry.  Co.  v.  Hellman  (1895),  109  Cal.  571,  in 
holding  that  voting  by  proxy  to  authorize  a  bond  issue,  under 
a  by-law  and  code  provision  authorizing  and  recognizing  vot- 
ing by  proxy,  was  valid  and  efi^ectual,  Searls,  C,  said: 

"The  modern  law-writers  upon  corporations  without  ex- 
ception, so  far  as  we  have  observed,  recognize  the  right  of  a 
private  corporation,  in  the  absence  of  any  statute  on  the  sub- 
ject, to  provide  by  by-law  for  the  stockholders  to  vote  by 
proxy.  Taylor,  at  section  579,  of  his  work  on  Corporations, 
says:  'It  is  held  that  stockholders  have  no  implied  right  to 
vote  by  proxy,  but  it  is  competent  for  a  corporation  by  a  by- 
law to  authorize  votes  to  be  cast  in  that  manner';  citing 
People  V.  Crossley,  69  111.  195;  State  v.  Tudor,  5  Day,  329." 

§  141.  It  is  generally  conceded  that  a  proxy  is  always  rev- 
ocable, though  in  terms  made  irrevocable.  In  Schmidt  v. 
Mitchell  (1897),  101  Ky.  570,  in  holding  that  a  proxy  given  by 


125  STOCKHOLDERS.  §  142 

one  of  several  executors,  to  remain  in  force  until  revoked  by 
him,  does  not  prevent  its  revocation  by  another  executor,  Du 
Relle,  J.,  said: 

"Nor  can  we  concur  in  the  contention  that  the  provision 
in  the  proxy  given  to  Dietz  by  Lowman,  that  it  should  remain 
in  force  until  'revoked  by  me  by  giving  the  secretary  of  said 
company  notice  over  my  own  signature  that  it  had  been  re- 
voked, '  rendered  the  proxy  irrevocable  except  in  the  mode  pre- 
scribed. *A  proxy  is  always  revocable.  Even  when  by  its 
terms  it  may  be  irrevocable,  the  law  allows  the  stockholder  to 
revoke  it.'  1  Cook,  Stock,  Stockh.  &  Corp.  Law,  §  610.  A 
proxy-holder  is  a  mere  agent.  His  powers  exist  only  at  the 
will  of  his  principal  and  may  be  revoked  by  the  latter  at  any 
time." 

In  Woodruff  v.  Dubuque  &  S.  C.  R.  Co.  (1887),  30  Fed.  91, 
it  was  held  that  a  stockholder,  who  with  others  constituting  a 
majority  had  deposited  his  stock  with  bankers,  authorizing 
them  under  an  agreement  to  dispose  of  the  stock  and  to  vote 
it,  remained  the  owner  until  sale  of  the  stock,  with  right  to 
control  the  vote  on  it,  and  therefore  to  revoke  the  proxy. 
Cook,  §  610. 

In  Cone  v.  Russell,  48  N.  J.  Eq.  208,  it  was  held  that  a 
proxy,  irrevocable  m.  terms  for  five  years,  given  by  executors 
and  trustees  holding  stock  as  such  was  revocable,  as  being 
otherwise  both  contrary  to  public  policy  and  a  breach  of  trust. 

§  142.  In  New  York  an  irrevocable  proxy  is  prohibited  by 
statute,  and  a  proxy,  though  irrevocable  in  terms,  given  with  a 
pledge  of  stock  as  collateral  is  revocable  (In  re  Germicide  Co., 
65  Hun,  206 ;  In  re  Glen  Salt  Co.,  17  App.  Div.  234)  ;  but 
where  stock  was  issued  to  two  jointly,  an  irrevocable  proxy 
by  one  to  the  other  was  upheld,  on  the  ground  that  otherwise 
the  stock  could  not  be  voted  anyway  without  mutual  assent. 
(Hey  V.  Dolphin,  92  Hun,  230.) 

On  the  other  hand,  there  is  more  recent  authority  for  the 
proposition  that  a  proxy,  irrevocable  in  terms,  where  coupled 
with  an  interest  and  appearing  to  be  for  a  purpose  not  illegal 
or  contrary  to  public  policy  for  some  special  reason,  is  valid. 
(Chapman  v.  Bates,  61  N.  J.  Eq.  658;  Mobile  etc.  Co.  v. 
Nicholas,  98  Ala.  92 ;  Whitehead  v.  Sweet,  126  Cal.  67 ;  Clowes 
V.  Miller,  60  N.  J.  Eq.  179 ;  Gage  v.  Fisher,  5  N.  D.  297.) 


§§  143,  144  SUMMARY  OF   CORPORATION  LAW.  126 

VOTING  TRUSTS. 

§  143,  Shrewd  managers  of  corporations  have  resorted  to 
various  devices  to  enable  them  to  sell  to  the  public  a  majority 
of  the  stock  and  at  the  same  time  retain  control  in  themselves, 
usually  for  the  ostensible  benefit  of  the  corporation,  sometimes 
for  its  real  better  management,  and  oftentimes,  if  not  quite 
always,  for  the  incidental  main  purpose  of  their  own  en- 
richment. 

Cook  on  Corporations,  sixth  edition,  section  622,  says: 

"The  control  of  a  corporation  generally  determines  its  suc- 
cess or  failure.  The  control  also  gives  power,  patronage,  per- 
quisites, salaries  and  position.  Hence  it  is  sought  for.  In 
a  large  corporation  the  absolute  control  generally  requires 
more  money  than  one  man  is  able  or  willing  to  invest,  conse- 
quently for  many  reasons  several  unite  to  obtain  and  retain  the 
control.  There  is  always  danger,  however,  that  some  of  these 
stockholders  may  die  or  sell  their  stock,  or  unite  with  some 
other  parties  to  obtain  control.  Hence  for  twenty  years  last 
past  the  business  community  and  the  lawyers  have  been  try- 
ing to  find  some  legal  way  of  so  tying  up  a  majority  of  the 
stock  of  a  corporation  as  to  prevent  its  being  lost." 

An  obvious  method  adopted  in  certain  cases  is  for  the  ma- 
jority to  agree  for  a  certain  period  to  vote  as  a  unit.  Diffi- 
culty of  enforcement  was  one  serious  objection  to  this. 

With  the  recognition  of  voting  by  proxy,  attempts  were 
made  to  retain  control  of  the  corporation  by  taking  irrevo- 
cable proxies.  These,  however,  were  not  countenanced  by  the 
courts,  and  were  held  invalid,  and  in  some  cases,  e.  g.,  in  New 
Tork,  were  prohibited  by  statute. 

§  144.  Finally,  the  plan  was  devised  of  transferring  the 
stock  to  trustees  for  a  certain  period  under  a  voting  trust 
agreement,  the  trustees  issuing  beneficial  stock  trust  certificates 
to  the  real  owners.  This  plan  had  the  merit,  from  the  man- 
ager's standpoint,  of  giving  the  trustees  the  nine  points'  ad- 
vantage of  possession.  This  was  early  condemned  and  repudi- 
ated by  the  courts  of  Connecticut  and  New  Jersey  as  contrary 
to  public  policy,  and  void  per  se,  on  the  ground  that  it  took  the 
control  and  exercise  of  discretionary  voting  power  from  those 


127  STOCKHOLDERS.  §  145 

beneficially  interested,  vesting  it  in  the  hands  of  a  few  in  a 
measure  adversely  interested,  and  opening  wide  the  door  to 
fraudulent  practices,  manipulation  and  monopoly,  in  the  long 
run  contrary  to  the  public  good,  whatever  the  apparent  tempo- 
rary benefit.  This  attitude  has  been  strongly  approved  for 
clearly  and  forcibly  stated  reasons  and  weighty  considerations 
by  the  courts  of  North  Carolina  and  Georgia, 

In  New  York,  voting  trusts  are  expressly  authorized  by 
statute  for  a  limited  period  of  five  years.  In  other  states, 
e.  g.,  Massachusetts,  Virginia,  Maine,  California  and  Wash- 
ington, voting  trusts  are  held  not  void  per  se,  and  are  coun- 
tenanced where  the  apparent  benefit,  in  the  opinion  of  the 
court,  warrants  recognition.  Nowhere,  however,  is  the  rea- 
soning of  the  Connecticut  and  North  Carolina  courts  an- 
swered, voting  trusts,  where  countenanced,  being  merely  de- 
clared, without  more,  not  to  be  contrary  to  public  policy. 

In  the  Massachusetts  and  Virginia  cases  the  voting  trust 
is  supported  on  the  grounds  merely  that  the  majority  may 
agree  to  act  together,  and  that  the  right  to  vote  incident  to 
stock  is  a  beneficial  property  right,  and  therefore  the  voting 
trust  is  an  active  trust  and  not  a  dry  trust. 

First,  assuming  it  to  be  true  that  a  majority  may  agree  to 
act  together,  it  by  no  manner  of  means  follows  from  that 
premise  that  the  majority  may  agree  to  follow  the  dictates 
of  one  or  more  for  a  period  of  time,  subordinating  their  own 
discretion  and  judgment. 

Secondly,  no  one  will  deny  that,  as  Mr.  Cook  says,  the  "con- 
trol of  a  corporation  gives  power,  patronage,  perquisites,  sal- 
aries and  position,"  and  that  the  right  to  vote  is  a  beneficial 
interest  and  a  voting  trust  an  active  trust,  and  still  no  answer 
is  made  to  the  contention  that  the  voting  trust  separates  the 
voting  control  of  the  corporation  from  the  beneficial  owner- 
ship, substantially  speaking,  of  the  corporation. 

§  145.  In  Bostwick  V.  Chapman  (the  Shepaug  Voting  Trust 
Cases),  60  Conn.  553,  in  holding  that  a  voting  trust,  created 
by  a  majority  of  the  stockholders  vesting  their  legal  title  to 
their  stock  in  a  trust  company  for  five  years  to  vote  on  the 


§  145  SUMMARY   OF    CORPORATION   LAW.  128 

stock,  was  void  on  the  ground  that  it  was  against  public  policy 
for  the  voting  power  to  be  separated  from  the  beneficial  in- 
terest, Robinson,  J.,  said: 

"It  is  the  policy  of  our  law  that  an  untrammeled  power 
to  vote  shall  be  incident  to  the  ownership  of  the  stock ;  and  a 
contract  by  which  the  real  owner's  power  is  hampered  by  a 
provision  therein  that  he  shall  vote  just  as  somebody  else 
dictates  is  objectionable.  I  think  it  against  the  policy  of  our 
law  for  a  stockholder  to  contract  that  his  stock  shall  be  voted 
just  as  someone  who  has  no  beneficial  interest  or  title  in  or 
to  the  stock  directs ;  saving  to  himself  simply  the  title,  the 
right  to  dividends,  and  perhaps  the  right  to  cast  the  vote 
directed,  willing  or  imwilling,  whether  it  be  for  his  interest, 
for  the  interest  of  other  stockholders,  or  for  the  interest  of 
the  corporation,  or  otherwise.  This  I  conceive  to  be  against 
the  policy  of  the  law,  whether  the  power  so  to  vote  be  for  five 
years  or  for  all  time.  It  is  the  policy  of  our  law  that  owner- 
ship of  stock  shall  control  the  property  and  management  of 
the  corporation,  and  this  cannot  be  accomplished,  and  this 
good  policy  is  defeated,  if  stoclvholders  are  permitted  to  sur- 
render all  their  discretion  and  will  in  the  important  matter 
of  voting,  and  sufi:er  themiselves  to  be  mere  passive  instru- 
ments in  the  hands  of  some  agent,  who  has  no  interest  in  the 
stock,  equitable  or  legal,  and  no  interest  in  the  general  pros- 
perity of  the  corporation.  And  this  is  not  entirely  for  the 
protection  of  the  stockholder  himself,  but  to  compel  a  com- 
pliance with  the  duty  which  each  stockholder  owes  his  fellow- 
stockholder  to  so  use  such  power  and  means  as  the  law  and 
his  ownership  of  stock  give  him  that  the  general  interest  of 
stockholders  shall  be  protected  and  the  general  welfare  of 
the  corporation  sustained,  and  its  business  conducted  by  its 
agents,  managers  and  officers,  so  far  as  may  be,  upon  prudent 
and  honest  business  principles,  and  with  just  as  little  tempta- 
tion to,  and  opportunity  for,  fraud  and  the  seeking  of  in- 
dividual gains,  at  the  sacrifice  of  the  general  welfare,  as  is 
possible." 

To  the  same  effect,  Kreissl  v.  Distilling  Co.,  61  N.  J.  Eq. 
5 ;  Harvey  v.  Linville  Improv.  Co.,  118  N.  C.  693 ;  White  v. 
Thomas  Inflatable  Tire  Co.,  52  N.  J.  Eq.  183;  Bridgers  v. 
Staton,  150  N.  C.  216;  Sheppard  v.  Rockingham  Power  Co., 
150  N.  C.  776;  Bridgers  v.  First  Nat.  Bank,  152  N.  C.  293  j 
.Warren  v.  Pine,  66  N.  J.  Eq.  353. 


129  STOCKHOLDERS.  §§  146,  147 

§  146.  In  Morel  v.  Hoge  (1908),  130  Ga.  625,  it  was  held 
that  an  agreement  made  antecedent  to  the  formation  of  a  com- 
pany that  certain  stockholders  subscribing  to  fifty  per  cent  of 
the  capital  stock  should  indefinitely  control  the  company,  nam- 
ing three  out  of  five  directors,  was  void,  as  against  public 
policy,  in  that  it  deprived  the  majority  of  control.  Fish,  C.  J., 
after  citing  with  approval,  among  others,  Shepaug  Voting 
Trust  Cases,  60  Conn.  579,  Cone  v.  Russell,  48  N.  J.  Eq.  208, 
White  V.  Thomas  Inflatable  Tire  Co.,  52  N.  J.  Eq.  178,  Harvey 
v.  Linville  Improv.  Co.,  118  N.  C.  693,  said: 

"We  are  aware  that  there  are  some  cases  in  which  a  con- 
trary principle  is  announced,  but  in   our  opinion  the  cases 

cited  announce  the  better  doctrine Our  conclusion  is 

that  the  contract  set  up  by  the  respondents  to  the  rule  as 
cause  why  mandamus  absolute  should  not  be  granted  is 
against  public  policy,  and  therefore  void,  because  it  indefi- 
nitely deprives  the  owners  of  the  stock  constituting  the  Hilton 
faction,  though  they  have  a  majority  of  the  stock,  of  the  power 
to  exercise  their  right,  as  well  as  their  duty,  to  the  stockhold- 
ers, present  or  future,  and  to  the  public,  to  so  vote  in  the 
election  of  directors  for  the  company  as  will,  in  their  judg- 
ment, promote  its  prosperity  and  best  enable  it  to  perform  its 
duties  to  the  public,  and  because  it  gives  the  shareholders  of 
the  Morel  faction,  even  though  they  may  own  but  a  small 
minority  of  the  stock,  the  right  to  indefinitely  control  the 
affairs  of  the  corporation,  including  the  right  to  fix  the  com- 
pensation of  its  officers  and  agents  and  to  fill  any  of  such 
positions  from  among  its  own  members." 

§  147.  In  Smith  v.  San  Francisco  &  N.  P.  Ry.  Co.  (1897), 
115  Cal.  584,  it  was  held  that  an  agreement  by  several  persons 
purchasing  stock  of  the  company  to  vote  the  whole  as  a 
unit  for  five  years  was  valid  and  not  contrary  to  public 
policy.  Harrison,  J.,  in  the  opinion  of  the  court,  held  the 
agreement  valid,  as  not  being  in  restraint  of  trade,  and  on  the 
ground  that  it  is  neither  illegal  nor  against  public  policy  to 
separate  the  voting  power  from  the  beneficial  interest  of 
stock,  citing  in  support  of  this  position,  among  others,  the 
Shepaug  Voting  Trust  Cases,  60  Conn.  553.  Beatty,  C.  J., 
dissented,  saying: 
9 


§  148  SUMMARY   OF    CORPORATION   LAW.  130 

"There  is  not  time  at  my  comanand  to  go  over  the  decisions, 
but  I  am  satisfied  that  the  weight  of  authority  is  against  the 
validity  of  any  contract  by  which  the  sole  owner  of  stock 
parts  irrevocably  with  the  right  to  vote  it  with  the  effect 
of  putting  a  minority  in  control  of  the  corporation." 

In  Mobile  &  0.  R.  Co.  v.  Nicholas  (1893),  S8  Ala.  92,  a 
voting  trust,  created  by  the  stockholders  executing  an  irrev- 
ocable power  of  attorney  or  proxy  to  trustees  to  vote  the 
stock  until  debenture  bonds  should  be  paid,  was  held  valid, 
Coleman,  J.,  without  citation  of  the  cases,  saying: 

"We  have  examined  case  after  case,  and  find  generally  that 
the  agreements  declared  void  by  the  courts,  where  the  power 
to  vote  was  separated  from  the  stockholder  and  vested  in 
third  persons,  were  under  circumstances  which  showed  that 
the  purpose  to  be  accomplished  v^as  unlawful — such  as  the 
courts  would  not  sanction  if  the  principal  had  voted  and  not 
a  proxy ;  and  in  case  of  a  mere  dry  trust,  it  is  held  that  the 
stockholder  might  revoke  a  power  of  attorney  in  form  irrev- 
ocable  Tested  by  any  principle  of  law,  legal  or  equi- 
table, the  agreement  was  not  only  valid,  but  fair,  at  least,  to 
the  corporation  company  and  stockholders." 

In  Faulds  v.  Yates  (1870),  57  111.  416,  it  was  held  that  an 
agreement  between  stockholders  owning  a  majority  of  the 
stock  to  vote  their  stock  as  a  unit  for  directors  was,  under 
the  circumstances  of  that  case,  valid,  Thornton,  J.,  stating 
the  ground  of  decision  as  follows: 

"The  agreement  in  this  case  was  not  for  the  injury  of  the 
minority  stockholders.     It  could  not  have  been  so  intended, 

and  we  cannot  perceive    that  it  could  so  operate A 

careful  reading  of  the  contract  shows  no  hidden  advantage  in- 
tended, no  fraud,  no  dishonesty." 

§  148.  In  Brightman  v.  Bates  (1900),  175  Mass.  105,  a 
syndicate  agreement  for  the  purchase  of  stock  in  a  company, 
containing  the  clause  that  the  stock  "shall  be  voted  at  each 
annual  meeting"  for  three  years  for  a  board  of  directors 
named  by  the  committee,  assuming  that  it  was  to  be  carried  out 
by  placing  the  stock  in  trustees  under  a  voting  trust  agree- 
ment, was  held  valid;  Holmes,  C.  J.,  said: 

"We  know  nothing  in  the  policy  of  our  law  to  prevent  a 
majority  of  stockholders  from  transferring  their  stock  to  a 


131  STOCKHOLDERS.  §  148 

trustee  with  unrestricted  power  to  vote  upon  it.  Brown  v. 
Steamship  Co.,  5  Blatchf.  525,  527,  Fed.  Cas.  No.  2025.  See 
Green  v.  Nash,  85  Me.  148,  26  Atl.  1114.  Supposing  that 
the  committee  had  been  trustees,  what  would  the  syndicate 
agreement  have  amounted  to  then?  Merely  an  agreement  by 
each  of  the  trustees  to  vote  as  they  should  jointly  agree  to 
vote,  and  an  agreement  by  the  subscribers  not  to  demand  back 
their  shares  for  three  years.  The  latter  term  is  not  illegal, 
whether  valid  or  not.  A  stockholder  has  a  right  to  put  his 
shares  in  trust,  whatever  his  motive.  If  the  trust  is  an  active 
one.  he  cannot  terminate  it  at  will;  and  the  attempt  to  cut 
himself  oil'  by  contract,  instead  of  by  the  imposition  of  duties 
from  ending  it,  certainly  is  not  enough  to  poison  the  covenant 
with  the  plaintiff.  See  "Williams  v.  Montgomery,  148  N.  Y. 
519,  525,  43  N.  E.  57.  It  might  be  held  that  the  duty  of 
voting  incident  to  the  legal  title  made  such  a  trust  an  active 
one  in  all  cases.  As  to  the  arrangement  for  the  trustees 
uniting  to  elect  their  candidates,  the  decisions  of  other  states 
show  that  such  arrangements  have  been  upheld,  and  we  do 
not  think  it  needs  argument  to  prove  that  they  are  lawful. 
If  stockholders  want  to  make  their  power  felt,  they  must 
unite.  There  is  no  reason  why  a  majority  should  not  agree 
to  keep  together.  Faulds  v.  Yates,  57  111.  416 ;  Smith  v. 
Railway  Co.,  115  Cal.  584,  57  Pac.  582,  35  L.  R.  A.  309; 
Havemeyer  v.  Havemeyer,  43  N.  Y.  Super.  Ct.  506,  512,  513, 
affirmed  according  to  Beach  Priv.  Corp.,  §  504,  note  6,  and 
Fisher  v.  Bush,  35  Hun,  641,  in  86  N.  Y.  618.  See  Brown 
v.  Steamship  Co.,  5  Blatchf.  525,  527,  Fed.  Cas.  No.  2025." 

In  Williams  v.  Montgomery,  148  N.  Y.  519,  it  was  merely 
held  that  an  agreement  to  deposit  certain  stock  in  a  trust 
company  and  not  withdraw  it  for  six  months  was  valid. 

In  Brown  v.  Pacific  Mail  Steamship  Co.  (1867),  Fed.  Cas. 
No.  2025,  Blatchford,  J.,  held  an  agreement  not  to  sell  certain 
stock  for  a  certain  period,  with  a  power  of  attorney  in  terms 
irrevocable  but  really  revocable  at  any  time,  not  "contrary 
to  public  policy  or  anywise  open  to  objection."  No  discus- 
sion of  authorities  or  principles. 

In  Fisher  v.  Bush,  35  Hun,  641,  it  was  held  that  an  agree- 
ment not  to  sell  stock  nor  vote  the  same  by  proxy  was  with- 
out consideration,  and  also  void  as  against  public  policy. 

In  Greene  v.  Nash  (1892),  85  Me.  148,  the  court  refused 
to  rescind  a  deposit  of  stock  with  voting  trustees  by  the  duly 
authorized  attorney  of  the  stockholder,  the  voting  trust  agree- 


§  149  SUMMARY   OF   CORPORATION   LAW.  132 

ment  having  been  acted  on  by  all  parties.  There  was  no 
discussion  of  principles  or  authorities,  the  court  merely  say- 
ing: 

' '  The  court  should  be  very  careful  in  setting  aside  contracts 

and  agreements  which  have  been  acted  upon  in  good  faith  by 
others." 

§  149.  In  Carnegie  Trust  Co.  v.  Security  L.  Ins.  Co.  (Va. 
1910),  68  S.  E.  412,  a  voting  trust  agreement,  under  which 
stock  was  transferred  to  trustees  for  twenty-five  years  to  vote 
and  deal  with  as  if  they  were  owners,  the  real  owners  receiving 
beneficial  certificates,  was  held  an  active  trust,  not  void  per 
se,  and  not  against  public  policy  in  that  particular  case. 
After  reviewing  the  authorities  at  length,  Keith,  P.,  in  deliv- 
ering the  opinion  of  the  court,  said : 

"It  is  impossible  to  read  the  argument  of  counsel  and  the 
cases  and  text-writers  cited  without  perceiving  that  the  force 
of  the  attack  upon  such  agreements  as  that  under  con- 
sideration rests  upon  the  proposition  that  the  trustees  are 
clothed  only  with  the  naked  or  dry  trust,  wholly  separated 
or  'divorced,'  as  it  is  sometimes  described,  from  the  beneficial 
interest  in  the  stock.  If  the  analysis  of  the  elements  of 
property  in  the  ownership  of  a  share  of  stock  given  by  Cook 
on  Corporations,  sixth  edition,  section  312,  be  sound — and 
we  think  it  cannot  be  controverted — then  the  right  to  vote 
the  stock  is,  in  itself  and  of  itself,  a  valuable  right  of  prop- 
erty, and  such  a  trust  becomes,  by  virtue  of  that  right,  an 
active  and  not  a  passive  or  dry  trust.  If  this  view  be  cor- 
rect, it  of  course  answers  the  other  branch  of  the  proposition, 
and  there  would  be  no  separation — certainly  no  complete  sep- 
aration— or  'divorce,'  such  as  is  contended  for,  of  the  owner- 
ship of  the  stock  from  the  beneficial  interest  in  it. 

"Passing  from  definitions  as  given  by  writers  upon  the 
law  of  corporations  and  considering  it  as  a  practical  subject, 
does  not  common  experience  prove  that  the  power  to  manage 
and  control  property  is  a  valuable  right ;  that  the  right  to 
manage  and  control  a  great  corporation  to  direct  its  policies, 
involving  in  many  cases  the  rightful  levy  and  expenditure 
of  vast  sums  of  money,  is  in  itself  and  of  itself  a  right  of 
great  value?  Is  it  not  a  matter  of  common  knowledge  that 
the  common  stock  of  many  corporations  which  have  never 
paid  a  dividend  has  a  considerable  market  value  growing  out 
of  and  dependent  upon  the  right  to  vote  the  common  stock 


133  STOCKHOLDERS.  §  150 

which  is  the  power  of  control?  It  may  be  that  the  expression 
used  by  Mr.  Justice  Holmes,  of  the  supreme  court  of  Massa- 
chusetts in  Brightman  v.  Bates,  supra,  was  in  the  particular 
case  an  obiter  dictum,  but  his  observation  is  none  the  less 
true  that  it  might  with  propriety  be  held  'that  the  duty  of 
voting  incident  to  the  legal  title  makes  such  a  trust  an  active 
one  in  all  cases.' 

"Let  it  be  remembered  that  in  this  case  the  trustees  were 
the  absolute  owners  of  the  stock,  and  that  when  they  sold 
the  trust  certificates  they  agreed  to  sell,  and  the  purchasers 
of  those  certificates  only  bought  the  right  to  receive  payments 
equal  to  the  dividends  upon  the  shares  of  stock,  less  the 
expense,  if  any,  incurred  by  the  trustees,  and  on  the  1st 
of  February,  1932,  to  call  for  certificates  for  full  paid  shares 
of  stock  at  their  par  value,  and  that  in  the  meantime  the 
right  to  vote  remained  in  the  trustees,  in  order  to  promote 
and  to  protect  the  value  of  the  stock  and  to  secure  the  satis- 
factory management  of  the  security  company. 

"As  we  have  said,  there  is  no  case  in  this  state  upon  the 
subject;  and  upon  an  examination  of  the  authorities  else- 
where, we  are  unable  to  say  that  the  contract  under  considera- 
tion should  be  held  violative  of  the  public  policy  of  this  com- 
monwealth." 

§  150.  In  Boyer  v.  Nesbitt  (1910),  227  Pa.  398,  a  voting 
trust  was  held  valid  on  the  ground  that  in  that  case  it  was 
coupled  with  an  interest  in  the  trustees  who  were  given  a  right 
to  purchase  stock,  and  further,  that  while  the  general  policy  of 
the  law  prohibits  the  separation  of  the  voting  power  from  the 
beneficial  interest,  it  was  found  as  a  fact  in  that  case  that  a 
property  interest  and  a  definite  policy  of  beneficial  interest  to 
the  corporation  was  to  be  carried  out  by  the  voting  trust. 

In  Winsor  v.  Commonwealth  Coal  Co.  (1911),  63  Wash.  62, 
114  Pac.  908,  an  agreement  to  pool  stock  for  a  term  of  years 
was  held  valid  on  the  ground  that  persons  owning  stock  have 
the  unqualified  right  to  combine  their  interests  to  secure  the 
management  of  the  corporation  when  such  management  is  fair 
to  all  stockholders  alike. 


§§  155,  156  SUMMARY   OF    COEPOBATION    LAW.  134 


CHAPTER  VII, 

DIRECTORS  AND  OFFICEKS. 

§  155.  Directors  are  agents  of  a  corporation  appointed  by 
the  stockholders ;  officers  are  agents  of  a  corporation  appointed 
by  the  directors. 

A  corporation  being  purely  a  statutory  unit  person  or 
entity,  it  can  only  act  by  the  concerted  authority  of  its  mem- 
bership executed  by  agents.  While  in  most  jurisdictions 
certain  corporate  acts  are  deemed  of  such  fundamental  im- 
portance as  to  require  the  express  authorization  by  the  mem- 
bership or  stockholders,  as,  for  example,  the  increase  of  the 
capital  stock,  it  would  be  cumbersome  and  impracticable  in 
the  large  majority  of  cases  to  require  the  membership  or 
stockholders  of  the  corporation  to  convene  for  the  purpose 
of  considering  and  passing  upon  routine  acts  in  the  exercise 
of  the  corporate  powers. 

For  this  reason  the  exercise  by  the  corporation  of  its  gen- 
eral corporate  powers  is  usually  committed  by  the  stock- 
holders, either  expressly  by  virtue  of  the  statute  or  indirectly 
by  the  by-laws,  to  a  managing  board  commonly  called  di- 
rectors or  trustees.  This  managing  board  represents  the 
body  of  stockholders  in  the  management  of  the  corporate 
affairs  and  the  corporate  entity  itself  as  agent  and  agents 
in  dealing  with  the  outside  public.  Being  representatives 
and  agents  of  the  corporation,  the  directors  or  trustees  do 
not  own  the  corporate  property  and  are  not  vested  with  any 
legal  title  to  it,  and  can  only  deal  with  it  in  the  corporate 
name,  being  in  their  dealings  subject  to  the  usual  rules  and 
limitations  applicable  to  agents  dealing  for  principals. 

§  156.  As  regards  the  corporations  and  the  stockholders, 
the  directors  or  trustees  are  limited  to  the  powers  actually  con- 
ferred upon  them  expressly  or  by  implication  in  fact,  but  their 
power  to  bind  the  corporation  in  dealing  with  the  public  is 
limited  only  by  their  ostensible  authority,  and  that  in  most 


135  DIRECTORS   AND   OFFICERS.  §  157 

cases  is  limited  only  by  the  charter  powers  of  the  corpora- 
tion. Ostensible  authority  is  that  authority  held  out  to  the 
public  expressly  or  by  acts  and  dealings.  In  the  case  of 
corporations,  the  directors  are  held  out  as  managers  gen- 
erally, and  in  the  absence  of  express  limitation  brought  home 
to  parties  dealing  with  the  directors,  their  ostensible  powers 
are  coextensive  with  the  powers  of  the  corporation  as  ex- 
pressed in  the  charter  and  statutes.  It  is  a  principle  of 
agency  that  any  act  of  an  agent,  though  it  be  unauthorized, 
yet  if  it  be  not  unlawful,  may  be  ratified  by  the  principal. 
The  rule  applies  equally  well  in  the  case  of  directors  as  of 
other  agents.  Acts  of  directors,  though  they  be  ultra  vires, 
i.  e.,  beyond  their  express  powers  as  directors  and  therefore 
unauthorized,  yet  if  they  be  not  ultra  vires  the  corporation, 
i.  e.,  not  beyond  the  charter  powers  and  therefore  not  un- 
lawful, may  be  ratified  by  the  stockholders,  and  ratification 
in  turn  may  be  express  or  implied;  i.  e.,  by  allowing  acts  to 
pass  without  objection  until  others  in  reliance  thereon  have 
acted  or  changed  their  position  to  their  detriment.  Acts 
of  directors  in  the  corporate  name,  within  the  corporate 
powers,  where  expressly  authorized  or  ratified  or  not  ob- 
jected to  seasonably  before  others  have  acted  in  rightful  re- 
liance thereon,  are  binding  on  the  corporation. 

§  157.  Officers  differ  from  directors  only  in  these  respects, 
namely,  that  they  are  usually  appointed  by  the  directors  and 
not  by  the  stockholders,  and  the  scope  of  their  authority  is  spe- 
cial, not  general,  as  is  that  of  directors.  The  employment  of 
an  officer  of  a  corporation  as  that  of  president,  treasurer  or 
secretary  is  a  special  employment,  and  the  ostensible  au- 
thority of  an  officer  is  not  per  se  coextensive  with  the  cor- 
porate powers,  as  is  that  of  directors,  but  exceeds  express 
authority  conferred  only  to  the  extent  that  the  course  of 
dealing,  the  acts  or  inaction,  the  speech  or  silence  of  the 
directors  and  body  of  stockholders  import  approval,  and 
therefore  imply  authority. 

The  appointment  and  authority  of  other  agents  are  governed 
by  substantially  the  same  rules  as  those  applicable  to  officers. 


§§158,159  SUMMARY  OF  CORPORATION  LAW.  136 

§  158.  The  directors,  officers  and  other  agents  of  a  corpora- 
tion occupy  a  fiduciary  relation  toward  the  corporation  and 
stockholders  and  are  in  duty  bound  to  exercise  reasonable 
capacity,  diligence  and  energy  in  the  management  of  the  cor- 
porate affairs  bona  fide  for  the  benefit  of  the  corporation  and 
the  stockholders,  and  in  all  their  dealings  in  the  name  of  the 
corporation  and  for  the  corporation  they  are  bound  to  exercise 
the  utmost  good  faith  and  to  subordinate  their  individual 
interests  to  those  of  the  corporation  and  the  stockholders. 
Just  as  an  agent  of  an  individual  may  not  deal  in  the  name 
of  his  principal  with  himself  as  agent,  so  the  directors  of  a 
corporation  can  only  deal  in  the  name  of  the  corporation  with 
themselves  as  individuals  with  the  assent  of  the  stockholders, 
and  any  dealing  of  the  directors  of  a  corporation  with  the 
corporation  or  in  its  name  for  the  benefit,  directly  or  indi- 
rectly, of  themselves  as  individuals,  is,  until  the  contrary  is 
shown,  presumed  to  be  fraudulent,  and  while  not  wholly  void 
per  se,  is  voidable  at  the  election  of  the  stockholders. 

§  159.  Directors,  officers  and  agents  of  a  corporation  are 
accountable  to  the  corporation  and  through  it  to  the  stock- 
holders and  creditors  for  their  dealings  with  or  in  the  name  of 
the  corporation. 

In  holding  that  where  the  charter  of  a  corporation  contem- 
plates transaction  of  corporate  business  by  a  special  body  or 
board  of  directors,  any  act  in  the  corporate  name  by  any  agent 
or  officer  authorized  by  the  board  of  directors  and  within  the 
charter  powers  of  the  corporation  is  binding  on  the  corpora- 
tion. Story,  J.,  in  Fleckner  v.  United  States  Bank,  8  Wheat. 
338,  said  (p.  356)  : 

"The  first  objection  urged  against  this  evidence  is,  that  the 
corporation  could  not  authorize  any  act  to  be  done  by  an  agent, 
by  a  mere  vote  of  the  directors,  but  only  by  an  appointment 
under  its  corporate  seal.  And  the  ancient  doctrine  of  the 
common  law  that  a  corporation  can  only  act  through  the  in- 
strumentality of  its  common  seal  has  been  relied  upon  for  this 
purpose.  Whatever  may  be  the  original  correctness  of  this 
doctrine,  as  applied  to  corporations  existing  by  the  common 
law,  in  respect  even  to  which  it  has  been  certainly  broken  in 
upon  in  modern  times,  it  has  no  application  to  corporations 


137  DIRECTORS   AND   OFFICERS.  §  160 

created  by  statute,  whose  charters  contemplate  the  business  of 
the  corporation  to  be  transacted  exclusively  by  a  special  body 
or  board  of  directors.  And  the  acts  of  such  body  or  board, 
evidenced  by  a  written  vote,  are  as  completely  binding  upon 
the  corporation,  and  as  complete  authority  to  their  agents, 
as  the  most  solemn  acts  done  under  the  corporate  seal.  In  re- 
spect to  banks,  from  the  very  nature  of  their  operations,  in 
discounting  notes,  in  receiving  deposits,  in  paying  checks,  and 
other  ordinary  and  daily  contracts,  it  would  be  impracticable 
to  affix  the  corporate  seal  as  a  confirmation  of  each  individual 
act.  And  if  a  general  authority  for  such  purposes,  under  the 
corporate  seal,  would  be  binding  upon  the  corporation,  be- 
cause it  is  the  mode  prescribed  by  the  common  law,  must  not 
the  like  authority,  exercised  by  agents  appointed  in  the  mode 
prescribed  by  the  charter,  and  to  whom  it  is  exclusively  given 
by  the  charter,  be  of  as  high  and  solemn  a  nature  to  bind  the 
corporation  ?  To  suppose  otherwise  is  to  suppose  that  the 
common  law  is  superior  to  the  legislative  authority ;  and  that 
the  legislature  cannot  dispense  with  forms  or  confer  authori- 
ties which  the  common  law  attaches  to  general  corporations. 
Where  corporations  have  no  specific  mode  of  acting  prescribed, 
the  common-law  mode  of  acting  may  be  properly  inferred; 
but  every  corporation  created  by  statute  may  act  as  the  stat- 
ute prescribes,  and  the  common  law  cannot  control  by  implica- 
tion that  which  the  legislature  has  expressly  sanctioned. 
Indeed,  this  very  point  has  been  repeatedly  under  the  con- 
sideration of  this  court ;  and  in  the  case  of  Bank  of  Columbia 
V.  Patterson  (7  Cranch,  299)  and  Mechanics'  Bank  of  Alex- 
andria V.  Bank  of  Columbia  (5  Wheat.  326),  principles  were 
established  which  settle  the  point  that  the  corporation  may 
be  bound  by  contracts  not  authorized  or  executed  under  its 
corporate  seal  and  by  contracts  made  in  the  ordinary  discharge 
of  the  official  duty  of  its  agents  and  officers.  We  have  no 
doubt,  therefore,  upon  the  principles  of  the  common  law,  that 
a  vote  of  the  board  of  directors  of  the  Planters'  Bank  was  as 
full  authority  for  any  act  of  this  nature  to  bind  the  corpora- 
tion as  if  it  had  passed  under  the  common  seal." 

§  160.  In  holding  the  question  whether  a  cashier  had  acted 
within  his  ostensible  authority  to  be  for  the  jury  to  determine, 
Swayne,  J.,  in  Merchants'  Bank  v.  State  Bank,  10  Wall.  604, 
said  (p.  644)  : 

"It  should  have  been  left  to  the  jury  to  determine  whether 
from  the  evidence  as  to  the  powers  exercised  by  the  cashier, 
with  the  knowledge  and  acquiescence  of  the  directors,  and  the 


§  161  SUMMARY   OF    CORPORATION   LAW.  138 

usage  of  other  banks  in  the  same  city,  it  might  not  fairly  be 
inferred  that  Smith  had  authority  to  bind  the  defendant  by 
the  contract  which  he  made  with  the  INIerchants'  Bank. 

"Where  a  party  deals  with  a  corporation  in  good  faith — the 
transaction  is  not  ultra  vires — and  he  is  unaware  of  any  de- 
fect of  authority  or  other  irregularity  on  the  part  of  those 
acting  for  the  corporation,  and  there  is  nothing  to  excite  sus- 
picion of  such  defect  or  irregularity,  the  corporation  is  bound 
by  the  contract,  although  such  defect  or  irregularity  in  fact 
exists 

"Corporations  are  liable  for  the  acts  of  their  servants  while 
engaged  in  the  business  of  their  employment  in  the  same 
manner  and  to  the  same  extent  that  individuals  are  liable 
under  like  circumstances." 

§  161.  In  holding  that  an  obligation  incurred  in  the  name 
of  a  company  by  its  de  facto  officers  was  binding  on  the  com- 
pany, Harlan,  J.,  in  Mining  Co.  v.  Anglo-Californian  Bank, 
104  U.  S.  192,  said  (p.  194)  : 

"Upon  the  board  of  directors  of  the  mining  company  was 
imposed,  by  the  laws  of  California  (Civil  Code,  sec.  305),  the 
duty  of  exerting  its  corporate  powers,  and  of  conducting  and 
controlling  its  business  and  property.  Among  the  powers 
which  the  company  had  (Civil  Code,  sec.  354)  was  the  power 
*to  enter  into  any  obligations  or  contracts  essential  to  the 
transaction  of  its  ordinary  affairs  or  for  the  purposes  for 
which  it  was  created.'  Necessarily,  therefore,  the  board  had 
authority  not  only  to  designate  the  banking  institution  in 
which  the  money  of  the  company  should  be  deposited,  but  to 
prescribe  the  mode  in  which  and  the  officers  by  whom  it  should 
be  withdrawn,  from  time  to  time,  for  use  of  the  company.  It 
is  equally  clear  that  the  board  had,  as  incident  to  the  general 
powers  conferred  by  law  upon  the  company,  power  to  borrow 
money  for  the  purposes  of  the  corporation,  and  to  invest  cer- 
tain officers  with  authority  to  negotiate  loans,  to  execute  notes, 
and  to  sign  checks  drawn  against  its  bank  account,  and  it  is 
settled  law  that  the  existence  of  such  authority  in  a  subordi- 
nate officer  may,  in  the  absence  of  express  statutory  prohibi- 
tion, be  shown  otherwise  than  by  the  official  record  of  the 
proceedings  of  the  board.  It  may  be  established  by  proof  of 
the  course  of  business  between  the  parties  themselves ;  by  the 
usages  and  practice  which  the  company  may  have  permitted 
to  grow  up  in  its  business ;  and  by  the  knowledge  w^hich  the 
board  charged  with  the  duty  of  controlling  and  conducting  the 
transactions  and  property  of  the  corporation  had,  or  must  be 


139  DIRECTORS  AND   OFFICERS.  §  162 

presumed  to  have  had,  of  the  acts  and  doincrs  of  its  subordi- 
nates in  and  about  the  affairs  of  the  corporation." 

§  162.  In  ho]din]o:  notes  ultra  vires,  made  pursuant  to  an 
ultra  vires  contract,  not  enforceable,  Campbell,  J.,  in  Pearce 
V.  R.  R.  Cos.,  21  How.  441,  said  (p.  443)  : 

"Now.  persons  dealinsf  with  the  manasrers  of  a  corporation 
must  take  notice  of  the  limitations  imposed  upon  their  author- 
ity bv  the  act  of  incorporation.  Their  powers  are  conceded  in 
consideration  of  the  advantage  the  public  is  to  receive  from 
their  discreet  and  intelligent  employment,  and  the  public  have 
an  interest  that  neither  the  managers  nor  stockholders  of  the 
corporation  shall  transcend  their  authority." 

In  holding  that  a  county  having  authority  to  issue  bonds 
had  ratified  an  issue  irregularly  made,  Clifford,  J.,  in  Super- 
visors v.  Schenck,  5  Wall.  772,  said  (p.  781)  : 

"Questions  of  ratification  most  frequently  arise  in  respect 
to  the  acts  or  omissions  of  agents,  but  the  general  rule  is  the 
same  in  all  cases  where  the  act  done  was  one  which  it  was  com- 
petent for  the  party  attempted  to  be  charged  to  do.  When 
the  principal,  upon  a  full  knowledge  of  all  the  circumstances 
of  the  case,  deliberately  ratifies  the  acts,  doings  or  omissions 
of  his  agent,  he  will  be  bound  thereby  as  fully,  to  all  intents 
and  purposes,  as  if  he  had  originally  given  him  direct  author- 
ity in  the  premises  to  the  extent  which  such  acts,  doings  or 
omissions  reach. 

"Ratification  is  inoperative  if  the  party  attempted  to  be 
charged  was  not  competent  to  make  the  contract  in  question 
when  the  same  was  made  nor  when  the  supposed  acts  of  rati- 
fication were  performed,  or  if  the  contract  was  illegal,  immoral 
or  against  public  policy.  Like  an  individual,  a  corporation 
may  ratify  the  acts  of  its  agents  done  in  excess  of  authority, 
and  such  ratification  may,  in  many  cases,  be  inferred  from 
acquiescence  in  those  acts,  as  well  as  from  express  adoption. 
Such  ratification  may  be  by  express  consent,  or  by  acts  and 
conduct  of  the  principal  inconsistent  with  any  other  hypothesis 
than  that  he  approved  and  intended  to  adopt  what  had  been 
done  in  his  name ;  and  it  was  held  in  Peterson  v.  The  Mayor 
of  New  York,  17  N.  Y.  453,  that  the  principle  is  as  applicable  to 
corporations  as  to  individuals.  Where  the  officers  of  the  cor- 
poration openly  exercise  powers  att"ecting  the  interests  of  third 
persons,  which  presupposes  a  delegated  authority  for  the  pur- 
pose, and  other  corporate  acts  subsequently  performed  show 
that  the  corporation  must  have  contemplated  the  legal  exist- 


■§§  163,  164  SUMMARY   OF    CORPORATION   LAW.  140 

ence  of  such  authority,  the  acts  of  such  officers  will  be  deemed 
ri<?htful  and  the  delep:ated  authority  will  be  presumed." 
(Bank  v.  Dandridge,  12  Wheat.  70.) 

In  holding  that  a  transaction  ultra  vires  the  charter  powers 
of  a  corporation  could  not  be  ratified,  White,  J.,  in  California 
Bank  v.  Kennedy,  167  U.  S.  362,  p.  371,  said : 

"It  would  be  a  contradiction  in  terras  to  assert  that  there 
was  a  total  want  of  power  by  any  act  to  assume  the  liability, 
and  yet  to  say  that  by  a  particular  act  the  liability  resulted. 
The  transaction  being  absolutely  void  could  not  be  confirmed 
or  ratified.  As  was  said  by  this  court  in  Union  PaciJSc  Ry, 
V.  Chicago  etc.  Ry.,  163  U.  S.  564,  speaking  through  Mr.  Chief 
Justice  Puller  (p.  581)  :  'A  contract  made  by  a  corporation 
beyond  the  scope  of  its  powers,  express  or  implied,  on  a  proper 
construction  of  its  charter,  cannot  be  enforced  or  rendered  en- 
forceable by  the  application  of  the  doctrine  of  estoppel.'  " 

§  163.  In  holding  that  directors  must  account  to  stock  and 
bond  holders  for  all  money  and  property  received  from  a  col- 
lusive and  fraudulent  sale  of  the  property  of  the  corporation, 
Strong,  J.,  in  Jackson  v.  Ludeling,  21  Wall.  616,  said  (p.  631)  : 

"That  the  property  was  sacrificed  by  means  of  an  unlawful 
and  widespread  combination  is  abundantly  proved^  and  that 
the  directors  who  were  parties  to  it,  and  who  became  the  pur- 
chasers, were  guilty  of  an  inexcusable  violation  of  confidence 

reposed  in  them  admits  of  no  doubt The  defendants 

can  take  nothing  from  such  a  sale  thus  made.  Were  we  to 
sustain  it  we  should  sanction  a  great  moral  and  legal  wrong, 
give  encouragement  to  faithlessness  to  trusts  and  confidence 
reposed,  and  countenance  combinations  to  wrest  by  the  forms 
of  law  from  the  uninformed  and  confiding  their  Just  rights." 

§  164.  Where  a  director  loaned  money  to  the  corporation 
secured  by  a  deed  of  trust  on  the  corporate  property  and  after- 
ward purchased  the  property  individually  under  the  power  of 
sale  in  the  deed.  Miller,  J.,  in  holding  that  the  transaction,  if 
voidable,  had  not  been  rescinded  wdthin  a  reasonable  time  in 
Twin  Lick  Oil  Co.  v.  Marbury,  91  U.  S.  587,  said  (p.  588)  : 

"That  a  director  of  a  joint  stock  corporation  occupies  one 
of  those  fiduciary  relations  where  his  dealings  with  the  sub- 
ject matter  of  his  trust  or  agency,  and  with  the  beneficiary 
or  party  whose  interest  is  confided  to  his  care,  is  viewed  with 


141  DIRECTORS   AND   OFFICERS.  §  164 

jealousy  Ly  the  courts,  and  may  be  set  aside  on  slight  grounds, 
is  a  doctrine  founded  on  the  soundest  morality,  and  which  has 
received  the  clearest  recognition  in  this  court  and  in  others. 
Koehler  v.  Black  River  Falls  Iron  Co.,  2  Black,  715;  Drury 
V.  Cross,  7  Wall.  299;  Luxemburg  R.  R.  Co.  v.  Maquav,  25 
Beav.  586;  The  Cumberland  Co.  v.  Sherman,  30  Barb. "553; 
16  Md.  456.  The  general  doctrine,  however,  in  regard  to  con- 
tracts of  this  class  is,  not  that  they  are  absolutely  void,  but 
that  they  are  voidable  at  the  election  of  the  party  whose  inter- 
est has  been  so  represented  by  the  party  claiming  under  it. 
We  say  this  is  the  general  rule ;  for  there  may  be  cases  where 
such  contracts  would  be  void  ab  initio ;  as  when  an  agent  to  sell 
buys  of  himself  and  by  his  power  of  attorney  conveys  to  him- 
self that  which  he  was  authorized  to  sell.  But,  even  here,  acts 
which  amount  to  a  ratification  by  the  principal  may  validate 
the  sale. 

"The  present  case  is  not  one  of  that  class.  While  it  is  true 
that  the  defendant,  as  a  director  of  the  corporation,  was  boimd 
by  all  those  rules  of  conscientious  fairness  which  courts  of 
equity  have  imposed  as  the  guides  for  dealing  in  such  cases, 
it  cannot  be  maintained  that  any  rule  forbids  one  director 
among  several  from  loaning  money  to  the  corporation  when 
the  money  is  needed  and  the  transaction  is  open  and  otherwise 
free  from  blame.  No  adjudged  case  has  gone  so  far  as  this. 
Such  a  doctrine,  while  it  would  afford  little  protection  to  the 
corporation  against  actual  fraud  or  oppression,  would  deprive 
it  of  the  aid  of  those  most  interested  in  giving  aid  judiciously, 
and  best  qualified  to  judge  of  the  necessity  of  that  aid  and 
of  the  extent  to  which  it  may  safely  be  given. 

"There  are  in  such  a  transaction  three  distinct  parties  whose 
interest  is  affected  by  it;  namely,  the  lender,  the  corporation 
and  the  stockholders  of  the  corporation. 

"The  directors  are  the  oiRcers  or  agents  of  the  corporation, 
and  represent  the  interests  of  that  abstract  legal  entity  and  of 
those  who  own  the  shares  of  its  stock.  One  of  the  objects 
of  creating  a  corporation  by  law  is  to  enable  it  to  make  con- 
tracts ;  and  these  contracts  may  be  made  with  its  stockholders 
as  well  as  with  others.  In  some  classes  of  corporations,  as  in 
mutual  insurance  companies,  the  main  object  of  the  act  of 
incorporation  is  to  enable  the  company  to  make  contracts  with 
its  stockholders,  or  with  persons  who  become  stockholders  by 
the  very  act  of  making  the  contract  of  insurance.  It  is  very 
true  that  as  a  stocldiolder,  in  making  a  contract  of  any  kind 
with  the  corporation  of  which  he  is  a  member,  is  in  some  sense 
dealing  with  a  creature  of  which  he  is  a  part  and  holds  a  com- 
mon interest  with  the  other  stockholders,  who  with  him  consti- 


§  165  SUMMARY   OF   CORPORATION   LAW.  142 

tute  the  whole  of  that  artificial  entity,  he  is  properly  held  to  a 
larger  amount  of  candor  and  good  faith  than  if  he  were  not 
a  stockholder.  So  when  the  lender  is  a  director,  charged,  with 
others,  with  the  control  and  management  of  the  affairs  of  the 
corporation,  representing  in  this  regard  the  aggregated  inter- 
est of  all  the  stockholders,  his  obligation,  if  he  becomes  a 
party  to  a  contract  with  the  company,  to  candor  and  fair 
dealing  is  increased  in  the  precise  degree  that  his  representa- 
tive character  has  given  him  power  and  control  derived  from 
the  confidence  reposed  in  him  by  the  stockholders  who  ap- 
pointed him  their  agent.  If  he  should  be  a  sole  director  or  one 
of  a  smaller  number  vested  with  certain  powers,  this  obliga- 
tion would  be  still  stronger  and  his  acts  subject  to  more  severe 
scrutiny,  and  their  validity  determined  by  more  rigid  prin- 
ciples of  morality  and  freedom  from  motives  of  selfishness. 
....  The  authorities  to  the  point  of  the  necessity  of  the  exer- 
.  cise  of  the  right  of  rescinding  or  avoiding  a  contract  or  trans- 
action as  soon  as  it  may  be  reasonably  done,  after  the  party 
with  whom  that  right  is  optional  is  aware  of  the  facts  which 
give  him  that  option,  are  numerous  and  well  collected  in  the 
brief  of  appellee's  counsel.  The  more  important  are  as  fol- 
lows: Badger  v.  Badger,  2  Wall.  87;  Ilarwood  v.  R.  R.  Co., 
17  Id.  78  ;  karsh  v.  Whitman,  21  Id.  178  ;  Vigers  v.  Pike,  8  CI. 
&  Fin.  650 ;  Wentworth  v.  Lloyd,  32  Beav.  467 ;  Follansbee  v. 
Kilbreth,  17  111.  522." 


LIABILITY,  AS  INDIVIDUALS,  OF  DIRECTORS  AND 
OFFICERS    OF    CORPORATIONS    FOR  ACTS  OR 
FAILURE  TO  ACT  WHILE    ENGAGED  IN    SUCH 
CAPACITY. 
§  165.     Officers  and  directors  of  corporations  are  not,  gen- 
erally speaking,  liable  for  corporate  acts,  but  they  are  liable 
for  their  own  acts  or  failure  to  act  to  the  extent  that  an  agent 
is  ordinarily  liable  for  acts  or  failure  to  act  when  about  the 
business  of  his  principal.     In  the  case  of  torts,  the  liability 
of  the  officer  or  director  is  determined  by  the  extent  of  his 
participation  therein;  in  the  case  of  contracts,  by  the  extent 
of  individual  liability  assumed,  ascertained  from  a  proper  con- 
struction of  the  facts  proving  the  contract,  oral  or  written. 
In  Arthur  v.   Griswold,   55  N.  Y.  400,   it  was  held  that 
directors  of  a  corporation  were  not  liable  for  damages  suf- 
fered through  the  false  representations  of  an  agent  of  the 


143  DIRECTORS   AND    OFFICERS.  §  166 

corporation  upon  which  the  plaintiff  had  been   induced  to 
make  loans  to  the  corporation.     Church,  C.  J.,  said: 

"To  maintain  an  action  for  obtaining  money  or  property 
by  fraudulent  representations,  it  must  be  shown  that  the 
person  charged  made  the  representations,  that  they  were  false 
to  his  knowledge,  and  that  the  representations  were  relied 
upon,  and  were  the  inducing  cause  for  parting  with  the  prop- 
erty. There  is  a  significant  weakness  in  the  plaintiff's  case 
to  establish  the  first  branch  of  the  rule  of  liability  against 
the  defendant  Corning.  He  had  no  interest  in  the  property 
transferred  to  the  company  and  did  not  participate  in  its  or- 
ganization. It  does  not  appear  that  he  ever  attended  a  meet- 
ing of  the  directors,  or  that  he  was  ever  in  Essex  county, 
where  the  property  is  located,  or  in  the  office  in  New  York, 
where  the  financial  business  was  transacted,  and,  as  to  the 
prospectus,  which  contains  the  principal  alleged  false  repre- 
sentations, it  does  not  appear  that  he  ever  saw  it  or  knew  of 
its  existence.  The  only  evidence  against  him  was  that  he 
was  named  as  a  director,  and  one  hundred  shares  of  stock 
were  issued  in  his  name  on  the  books  of  the  company,  the 
certificates  of  which  were  mailed  to  him.  But  for  the  infer- 
ence which  may  result  from  the  admission  in  his  answer  that 
he  was  a  director,  there  would  be  no  evidence  that  he  knew 
that  he  occupied  that  position.  We  think  the  evidence  was 
insufficient  to  maintain  a  charge  of  fraud. 

"The  mere  fact  of  being  a  director  and  stockholder  is  not 
per  se  sufficient  to  hold  a  party  liable  for  the  frauds  and 
misrepresentations  of  the  active  managers  of  a  corporation. 
Some  knowledge  of  and  participation  in  the  act  claimed  to  be 
fraudulent  must  be  brought  home  to  the  person  charged.  (51 
N.  Y.  27.)  The  pamphlet  or  prospectus  was,  in  fact,  printed 
before  the  organization  of  the  company,  and  was  mainly  pre- 
pared by  one  Remington,  who  was  the  active  promoter  and 
manager  of  the  company;  but  that  Mr.  Corning  had  any  con- 
nection with  it  or  knowledge  of  its  existence  is  not  shown." 

Similarly,  Wakeman  v.  Dalley,  51  N.  Y.  27. 

§  166.  "Where,  however,  a  person  participates  in  a  positive 
tortious  act,  he  is  liable,  though  he  acted  in  the  capacity  of  an 
officer  or  director  of  a  corporation. 

In  National  Car  Brake  Shoe  Co.  v.  Terre  Haute  Car  & 
Mfg.  Co.,  19  Fed.  514,  in  holding  officers  of  a  company  as 
well  as  the  corporation  liable  in  an  action  on  the  case  for 
infringement  of  a  patent,  Woods,  J.,  said: 


§  167  SUMMARY   OF   CORPORATION   LAW.  144 

"The  action  is  in  the  form  of  a  suit  in  trespass  on  the 
case,  and  consequently,  if  all  the  defendants  have  participated 
in  the  infringement,  they  are  all  liable,  though  the  individvials 
were  acting  simply  as  officers  of  the  company  in  doing  it. 
All  parties  who  take  part  in  a  tort  or  trespass  are  liable. 
A  man  cannot  retreat  behind  a  corporation  and  escape  lia- 
bility for  a  tort  in  which  he  actively  participates."  (Hemp- 
fling  V.  Burr,  59  Mich.  294;  United  Societv  of  Shakers  v. 
Underwood,  72  Ky.  609 ;  Peck  v.  Cooper,  112  111.  192 ;  Nun- 
nelly  V.  Southern  Iron  Co.,  94  Tenn.  397;  Chenango  Bridge 
Co.  V.  Paige,  83  N.  Y.  178;  Cahoone  Barnet  Mfg.  Co.  v. 
Rubber  &  Celluloid  Harness  Co.,  45  Fed.  582;  Edison  Electric 
Light  Co.  v.  Packard  Electric  Co.,  61  Fed.  1002;  Belo  v. 
Fuller,  84  Tex.  450 ;  Bates  v.  Van  Pelt,  1  Tex.  Civ.  App.  185 , 
Contra,  Bath  v.  Caton,  37  Mich.  199;  United  Nickel  Co.  v. 
Worthington,  13  Fed.  392;  Hewitt  v.  Swift,  3  Allen,  420.) 

§  167.  In  cases  where  damage  has  been  caused  by  negli- 
gence, if  an  officer,  director  or  other  agent  of  a  corporation  is 
placed  in  a  position  raising  a  duty  on  his  part  to  exercise  care, 
he  is  liable  for  damages,  caused  to  persons  without  blame  them- 
selves, by  his  failure  to  use  reasonable  care  under  the  circum- 
stances. 

A  distinction  is  made  in  many  cases  between  nonfeasance 
and  misfeasance,  but  this  is  not  very  intelligible,  for  there 
can  be  no  actual  case  of  nonfeasance  unless  where  a  person 
has  done  nothing  whatever,  however  remote,  in  connection 
with  the  matter  involved,  and  so  this  distinction  really  re- 
duces itself  to  saying  that  there  is  no  liability  for  negligent 
conduct  unless  it  be  the  proximate  cause  of  damage  suffered. 

In  Mayer  v.  Thompson-Hutchinson  Bldg.  Co.  (Ala.),  16 
South.  620,  in  holding  that  the  president  and  manager  of 
the  corporation  were  liable  equally  with  the  company  for 
damages  resulting  from  negligent  failure  to  erect  proper 
scaffolding  in  building  construction,  to  prevent  falling  of 
bricks  upon  persons,  Coleman,  J.,  said: 

"The  second  count  charges  the  defendants  with  neglect,  in 
their  failure  or  omission  to  erect  scaffold  or  guards  so  as  to 
prevent  brick  from  falling  to  the  ground.  On  this  proposi- 
tion the  defendant  Thompson  invokes  the  doctrine  that  an 
agent  or  servant  is  not  liable  for  a  mere  omission  or  non- 
feasance.    The  rule  is  stated  as  contended  for  in  Story  Ag., 


145  DIRECTORS   AND    OFFICERS.  §  167 

§  308,  and  in  Story  Cont.,  §  171,  and  there  are  numerous 
decisions  which  fully  sustain  the  text.  There  are  courts  of 
high  authority  which  hold  differently.  Our  attention  has  not 
be,f^n  called  to  any  decision  of  the  question  in  this  state,  and 
in  declaring  the  law  which  shall  govern  we  have  carefully 
considered  both  lines  of  decisions.  The  principle  upon  which 
the  rule  is  founded  as  declared  by  Story  is  that  there  is  no 
privity  between  the  servant  or  agent  and  third  persons,  but 
the  privity  exists  only  between  him  and  the  master  or  prin- 
cipal. This  relation  of  privity  is  that  from  which  arises  the 
maxim  'respondeat  superior.'  The  liability  of  the  principal 
or  master  to  third  persons  dees  not  depend  upon  any  privity 
between  him  and  such  third  persons.  It  is  the  privity  be- 
tween the  master  and  servant  that  creates  the  liability  of 
the  master  for  injuries  sustained  b.y  third  persons  on  account 
of  misfeasance  and  nonfeasance  of  the  servant  or  agent.  It 
is  difficult  to  apply  the  same  principles  w^hich  govern  in 
matters  of  contract  between  an  agent  and  third  persons  to  the 
torts  of  an  agent  which  inflict  injury  on  third  persons,  whether 
they  be  of  misfeasance  or  nonfeasance,  or  to  give  a  sound 
reason  wh}^  a  person  who,  acting  as  principal,  would  be  in- 
dividually liable  to  third  persons  for  an  omission  of  duty, 
becomes  exempt  from  liability  for  the  same  omission  of  duty 
because  he  was  acting  as  servant  or  agent.  The  tort  is  none 
the  less  a  tort  to  the  third  person,  whether  suffered  from  one 
acting  as  principal  or  agent,  and  his  rights  ought  to  be  the 
same  against  the  one  whose  neglect  of  duty  has  caused  the 
injury.  We  think  the  better  rule  declared  in  Baird  v.  Ship- 
man,  "22  Am.  St.  Rep.  504,  132  111.  16,  23  N.  E.  384,  in  which 
it  is  held  that  'an  agent  of  the  owner  of  property,  who  has 
the  complete  control  and  management  of  the  premises,  and 
who  is  bound  to  keep  them  in  repairs,  is  liable  to  third  per- 
sons for  injuries  resulting  to  the  latter  while  using  the  prem- 
ises in  an  ordinary  and  appropriate  manner,  through  the 
neglect  of  such  agent.  And  the  agent  cannot  excuse  himself 
on  the  plea  that  his  principal  is  liable.  It  is  not  his  contract 
that  exposes  him  to  liability  to  third  persons,  but  his  common- 
law  obligation  to  so  use  that  which  he  controls  as  not  to  injure 
another.'  See  notes  to  this  case  in  22  Am.  St.  Rep.  504.  In 
Ellis  V.  McNaughton,  76  Mich.  237,  42  N.  W.  1113,  we  find 
this  language:  'Misfeasance  may  involve  the  omission  to  do 
something  which  ought  to  be  done,  as  when  an  agent  engaged 
in  the  performance  of  his  undertaking  omits  to  do  something 
which  it  is  his  duty  to  do  under  the  circumstances ;  as  that 
when  he  does  not  exercise  that  degree  of  care  which  due  re- 
gard for  the  rights  of  others  requires.'  In  Campbell  v. 
10 


§§  168,  169  SUMMARY    OF    CORPORATION   LAW.  146 

Sugar  Co.,  62  Me.  552,  it  is  said:  'It  is  the  actual  personal 
ne5?:ligence  of  the  agents  which  constitutes  the  constructive 
negligence  of  the  corporation.  The  corporation  acts  through 
and  by  them,  and  they  act  for  the  corporation;  and  when  their 
acts  or  neglects  result  in  injury  to  third  persons,  they  are 
equally  responsible  with  their  principal.'  The  rule  is  broadly 
stated  in  14  Am.  &  Eng.  Ency.  Law,  814.  We  might  cite 
other  decisions  if  deemed  necessary.  We  hold  that  the  mere 
relation  of  agency  does  not  exempt  a  person  from  liability 
for  any  injury  to  third  persons,  resulting  from  his  neglect  of 
duty,  for  which  he  would  otherwise  be  liable." 

§  168.  In  Nunnelly  v.  Southern  Iron  Co.,  94  Tenn.  397,  in 
holding  officers  of  the  corporation  liable,  as  well  as  the  com- 
pany, for  allowing  muddy  water  to  be  discharged  into  a  stream 
running  through  plaintiff's  premises,  Hatcher,  special  justice, 
said: 

"When  a  person  enters  into  a  contract  with  a  corporation, 
through  its  agents  or  officers,  fairly  and  in  good  faith,  there 
can,  under  no  circumstances,  any  liability  attach  to  such 
agents  or  officers  in  respect  to  the  contract,  unless  so  stipu- 
lated. In  such  a  case  the  person  gets  just  what  he  bargained 
for,  a  liability  against  or  a  contract  with  a  corporation  alone. 
But  the  torts  or  wrongs  of  corporations  through  its  agents 
or  officers  are  governed  by  an  entirely  different  principle  of 
law.  If  the  agent  of  a  corporation  or  of  an  individual  com- 
mits a  tort,  the  agent  is  clearly  liable  for  the  same;  and  it 
matters  not  what  liability  may  attach  to  the  principal  for 
the  tort,  the  agent  must  respond  in  damages,  if  called  upon 
to  do  so." 

Similarly,  Greenberg  v.  Whitcomb  Lumber  Co.  (Wis.),  63 
N.  W.  93 ;  Jeune  v.  Sutton,  43  N.  J.  L.  257. 

§  169.  In  the  case  of  contracts,  the  question  of  the  liability, 
individually,  of  officers  or  directors  making  the  contract  is  a 
question  of  construction  to  determine  the  intention  expressed, 
orally  or  in  writing,  as  the  case  may  be.  The  question  often 
arises  in  connection  with  negotiable  instruments  signed  by 
individuals,  with  the  words  "president"  or  "secretary" 
added,  still  leaving  it  doubtful  on  the  instrument  whether 
the  note  or  other  obligation  is  that  of  the  corporation  or  of 
the  individuals,  or  both.     The  mere  addition  of  such  words, 


147  DIRBCTOBS   AND    OFFICERS.  §  169 

however,  is  not  sufficient  to  make  the  obligation  other  than 
that  of  the  parties  signing,  and  to  create  a  corporate  obliga- 
tion there  must  be  expressed  intention  so  to  do.  (Draper  v. 
Mass.  S.  H.  Co.,  5  Allen,  338;  McCandless  v.  Belle  Plane 
Co.,  78  Iowa,  161;  Guthrie  v.  Imbrie,  12  Or.  182;  note,  19  L. 
R.  A.  676.) 


§§175,176  SUMMARY    OF    CORPORATION   LAW.  148 


CHAPTER  VIII. 
CONSOLIDATION  AND  MERGER. 

§  175.  There  are  two  distinct  ways  of  uniting  two  or  more 
existing  corporations  into  one  corporation  ;  one  is  by  forming  a 
new  corporation  which  takes  over  all  or  part  of  the  property, 
franchises,  rights  and  liabilities  of  two  or  more  pre-existing 
corporations,  whose  existence  becomes  thereupon  terminated; 
the  other  occurs  where  of  two  or  more  existing  corporations  one 
continues  in  existence  under  the  same  or  a  different  corporate 
name  and  takes  over  the  property,  franchises,  rights  and 
liabilities  of  the  other  one  or  more  corporations  whose  existence 
becomes  thereupon  terminated.  The  former  method  of  unit- 
ing corporations  is  usually  termed  a  consolidation ;  the  latter 
is  termed  a  merger.  While  the  name  by  which  it  is  called 
matters  little,  it  is  often  important  before  the  event  to  deter- 
mine which  method  should  be  adopted  and  after  a  union  has 
been  effected  what  method  was  followed,  since  upon  it  turns 
the  question  whether  a  right  or  privilege  conferred  by  statute 
upon  a  new  corporation  has  been  or  should  be  acquired,  or 
whether  a  privilege  or  exemption  conferred  by  the  statute  in 
the  past  on  the  pre-existing  corporation  is  worth  preserving 
or  has  been  lost.  Neither  consolidation  nor  merger  can  be 
effected  except  under  and  by  virtue  of  statutory  authority, 
and  therefore  the  question  whether  a  consolidation  or  merger 
takes  place  and  what  property  rights  and  liabilities  are  ac- 
quired or  lost  is  to  be  determined  by  the  terms  of  the  statute 
under  which  the  merger  or  consolidation  takes  place  and  the 
terms  of  the  agreement  and  certificate  of  the  consolidation  or 
merger. 

§  176.  It  is  laid  down  as  a  rule  that  until  the  contrary  ap- 
pears from  the  statute  or  agreement  and  certificate  of  consoli- 
dation or  merger,  the  presumption  is  that  all  the  rights  and 
liabilities  of  each  of  the  old  companies  are  acquired  and  as- 
sumed by  the  new  company,  and  the  question  whether  the  new 


149  CONSOLIDATION   AND    MERGER.  §§  177,  178 

company  is  a  newly  created  corporation  or  one  of  the  pre-exist- 
ing corporations  continued  in  existence  resolves  ilself  into  the 
question  whether  tlie  language  of  the  authorizing  statute  con- 
tains words  creative  of  a  new  corporation  or  merely  words  con- 
tinuing the  existence  of  a  pre-existing  corporation. 

§  177.  In  holding  that  a  consolidated  company  under  the 
act  providing  for  the  consolidation  was  a  new  company  and 
not  entitled  to  a  certain  exemption  from  taxation  contained  in 
the  original  charters  of  the  constituent  companies,  Field,  J.,  in 
Railroad  Co.  v.  Maine,  96  U.  S.  499,  p.  509,  said: 

"The  provision  in  the  act  authorizing  consolidation  that  the 
new  company  should  have  all  the  powers,  privileges  and  immu- 
nities of  the  original  companies  must  therefore  be  taken  with 
the  qualification  that  it  should  have  them  so  far  as  they  could 
1)6  exercised  or  enjoyed  by  it  with  its  different  officers  and 
distinct  constitution.  Where  their  exercise  or  enjoyment  re- 
quired other  officers  or  a  different  constitution,  the  grant  was 
to  that  extent  necessarily  inoperative. 

"The  Maine  Central  Railroad  Company  was,  upon  the  con- 
solidation of  the  original  companies,  a  new  corporation,  as  dis- 
tinct from  them  as  though  it  had  been  created  before  their 
existence.  The  fact  that  the  powers,  privileges  and  immuni- 
ties which  they  had  possessed  were  conferred  upon  the  new 
company,  so  far  as  they  could  be  exercised  or  enjoyed  by  it, 
in  no  respect  affected  its  character  as  a  distinct  body.  A  new 
corporation  may  be  as  readily  created  by  the  union  of  two  or 
more  corporations  as  by  the  union  of  individuals;  and  its 
powers  and  privileges  may  as  well  be  designated  by  reference 
to  the  charters  of  other  companies  as  by  special  enumeration." 

§  178.  In  holding  that  the  question  whether  in  case  of  con- 
solidation of  two  or  more  companies  a  new  company  is  created 
or  the  pre-existing  companies  continue  merged  in  one  is  one 
of  the  proper  construction  to  be  placed  on  the  statute  au- 
thorizing the  consolidation,  and  in  that  case  before  the 
court  there  was  no  new  company  but  a  merger.  Strong,  J. 
in  Central  R.  R.  Co.  v.  Georgia,  92  U.  S.  665,  said  (p.  670)  : 

"It  may  be  that  the  consolidation  of  two  corporations  or 
amalgamation,  as  it  is  called  in  England,  if  full  and  complete, 
may  work  a  dissolution  of  them  both,  and  its  effect  may  be  the 
creation  of  a  new  corporation.     Whether  such  be  the  effect 


§  179  SUMMARY   OF    CORPORATION   LAW.  150 

or  not  must  depend  upon  the  statute  under  which  the  consoli- 
dation takes  place  and  of  the  intention  therein  manifested.  If 
in  the  statute  there  be  no  words  of  grant  of  corporate  powers, 
it  is  difficult  to  see  how  a  new  corporation  is  created.  If  it  is, 
it  must  be  by  implication,  and  it  is  an  unbending  rule  that 

a  grant  of  corporate  existence  is  never  implied If,  then, 

this  construction  of  the  act  of  August  24,  1872,  be  correct 
(and  we  cannot  doubt  that  it  is),  that  act  contemplated  and 
authorized  no  such  union  and  consolidation  of  the  two  com- 
panies as  should  work  a  surrender  of  their  charter  by  both 
of  them  and  the  creation  of  a  new  company.  At  most  it  in- 
tended a  merger  of  the  Macon  &  "Western  Railroad  Company 
into  the  other,  a  mode  of  transfer  of  that  compan.v's  franchise 
and  property  and  a  payment  therefor  with  stock  of  the  Cen- 
tral Company.  It  is  of  no  importance  to  the  inquiry  whether 
a  new  corporation  was  created  by  the  union  and  consolidation, 
that  the  Central  acquired  under  the  act  new  and  enlarged 
powers  as  well  as  new  stockholders.  It  was  authorized  to  own 
and  operate  a  railroad  from  Macon  to  Atlanta;  to  operate 
it  as  its  own.  It  was  also  authorized  to  increase  its  capital 
stock.  But  the  gift  of  new  powers  to  a  corporation  has  never 
been  thought  to  destroy  its  identity,  much  less  to  change  it 
into  a  new  being.  Such  a  gift  i:j  not  a  grant  of  corporate 
existence.  It  assumes  corporate  life  already  existing.  Nor 
is  it  a  necessary  inference  from  the  provision  of  the  act  of 
August  25,  1872,  requiring  the  board  of  directors  of  each  com- 
pany to  certify  the  union  and  consolidation  to  the  governor 
of  the  state,  that  the  union  was  intended  to  be  a  surrender 
of  the  charter  of  both  companies  and  the  acceptance  of  a  new 
charter.  There  were  sufficient  reasons  for  that  requirement 
without  the  large  inference  attempted  to  be  drawn  from  it. 
They  were  that  it  might  appear  in  the  office  of  the  Secretary 
of  State  that  the  Macon  and  Western  Railroad  Company  was 
no  longer  in  existence,  and  that  the  capital  stock  of  the  Cen- 
tral Company  had  been  increased. 

"Our  opinion  therefore  is,  that  the  charter  granted  to  the 
Central  Railroad  and  Banking  Company  of  Georgia  by  the 
act  of  1835  was  not  surrendered  by  its  action  under  the  later 
act  of  1872 ;  that  it  still  has  all  the  rights  that  were  originally 
conferred  upon  it  holding  them  under  the  charter  originally 
granted  to  it ;  and  consequently  that  it  is  not  in  the  power  of 
the  legislature  to  impose  upon  it  a  greater  tax  than  one-half 
of  one  per  centum  of  its  net  annual  income." 

§  179.  In  holding  that  a  corporation  into  which  had  been 
merged  certain  railroad  companies  was  entitled  to  the  exemp- 


151  CONSOLIDATION    AND    MERGER.  §  180 

tion  of  its  stock  from  taxation  enjoyed  by  one  of  the  constituent 
companies,  Waite,  C.  J.,  in  Tennessee  v.  Whitworth,  117 
U.  S.  139,  p.  147,  said: 

**When  two  railroad  companies  nnite  or  become  consoli- 
dated under  the  authority  of  law,  the  presumption  is,  until 
1he  contrary  appears,  that  the  united  or  consolidated  com- 
]>any  has  all  the  powers  and  privileges,  and  is  subject  to  all 
the  restrictions  and  liabilities,  of  those  out  of  which  it  was 
created.  Tomlinson  v.  Branch,  15  Wall.  460;  Branch  v. 
Charleston,  92  U.  S.  677,  682 ;  County  of  Scotland  v.  Thomas, 
94  U.  S.  682,  690;  Railroad  Co.  v.  Maine,  96  U.  S.  499,  512; 
Green  County  v.  Conness,  109  U.  S.  104.  From  this  it  fol- 
lows that  as  the  capital  stock  of  both  the  original  Tennessee 
corporations  was  exempt  from  taxation,  the  capital  stock  of 
the  united  or  consolidated  company  formed  by  the  simple 
aggregation  of  that  of  the  two  old  ones  is  also  exempt  unless 
it  has  been  provided  to  the  contrary.  Is  there  anything  in 
the  statute  authorizing  the  union  which  rebuts  this  presump- 
tion?    We  think  there  is  not." 


HOLDING  STOCK  OF  ITSELF  OR  OF   OTHER  COM- 
PANIES BY  CORPORATION. 

§  180.  Since  a  corporation  has  only  such  powers  as  are  con- 
ferred upon  it,  expressly  or  impliedly,  by  its  charter,  it  follows 
that  a  corporation  cannot  acquire  nor  hold  its  own  stock  ordi- 
narily, nor  that  of  other  companies,  unless  authorized  so  to  do 
by  statute. 

In  De  La  Vergne  Co.  v.  German  Savings  Inst.,  175  U.  S.  40, 
in  holding  that  a  contract  for  the  purchase  by  one  corporation 
of  the  stock  of  another  for  the  purpose  of  controlling  its  man- 
agement, not  being  expressly  authorized  by  statute,  was  ultra 
vires,  and  therefore  unenforceable,  Brown,  J.,  said  (pp.  54- 
58): 

"But  as  the  powers  of  corporations,  created  by  legislative 
act,  are  limited  to  such  as  the  act  expressly  confers,  and  the 
enumeration  of  these  implies  the  exclusion  of  all  others,  it 
follows  that,  unless  express  permission  be  given  to  do  so,  it  is 
not  within  the  general  powers  of  a  corporation  to  purchase 
the  stock  of  other  corporations  for  the  purpose  of  controlling 
their  management.  First  National  Bank  v.  National  Ex- 
change Bank,  92  U.  S.  122,  128 ;  Sumner  v.  Marcy,  3  Wood  & 


§  180  SUMMARY   OF   CORPORATION   LAW.  152 

Minot,  105;  Morawetz  on  Corp..  sec.  431 ;  1  Thompson  on  Corp., 
sec.  1102 ;  People  v.  Chicago  Gas  Trust  Co.,  130  Illinois,  268 ; 
Milbank  v.  New  York,  Lake  Erie  &  Western  Railroad,  64  How. 
Pr.  20;  Mechanics'  etc.  Bank  v.  Meriden  Co.,  24  Connecticut, 
159 

"Our  conclusion  upon  this  branch  of  the  case  is  that,  as  the 
main,  if  not  the  sole,  object  of  the  purchase  from  the  plaintiffs 
was  to  acquire  their  stock  in  the  Consolidated  Company,  such 
purchase  was  ultra  vires  the  Refrigerating  Company. 

"2.  Is  this  defense  available  to  the  Refrigerating  Company? 
"Whatever  doubts  might  have  been  once  entertained  as  to  the 
power  of  corporations  to  set  up  the  defense  of  ultra  vires  to 
defeat  a  recovery  upon  an  executed  contract,  the  rule  is  now 
well  settled,  at  least  in  this  court,  that  where  the  action  is 
brought  upon  the  illegal  contract,  it  is  a  good  defense  that  the 
corporation  was  prohibited  by  statute  from  entering  into  such 
contract,  although  in  an  action  upon  a  quantum  meruit  it  may 
be  compelled  to  respond  for  the  benefit  actually  received. 

"The  earliest  case  in  which  this  doctrine  is  distinctly  laid 
dowTi  is  that  of  Pearce  v.  Madison  &  Indianapolis  Railroad,  21 
How.  441,  in  which  it  appears  that  two  railroad  companies, 
which  had  been  consolidated,  gave  their  promissory  notes  in 
payment  for  a  steamboat  to  run  in  connection  with  the  rail- 
roads. It  was  held  that,  as  there  was  no  authority  in  the  rail- 
road companies  to  engage  in  running  steamboats,  there  could 
be  no  recovery  on  the  notes,  and  that  as  the  plaintiii  was  not 
the  owner  of  the  boat  and  had  sued  upon  the  notes  as  an  in- 
dorsee, there  could  be  no  recovery.  The  same  doctrine  has 
been  applied  to  leases  ultra  vires  a  corporation,  and  it  has 
been  uniformly  held  that  there  could  be  no  recovery  upon  the 
lease  itself,  though  there  might  be  in  an  action  for  use  and 
occupation  of  the  property.  Pittsburgh,  Cincinnati  etc.  Rail- 
way V.  Keokulv  &  Hamilton  Bridge  Co.,  131  U.  S.  371,  384 ; 
Central  Transportation  Co.  v.  Pullman's  Palace  Car  Co.,  139 
U.  S.  24,  48 ;  S.  C,  171  U.  S.  138 ;  McCormick  v.  Market  Bank, 
165  U.  S.  538,  550;  Thomas  v.  Railroad  Co.,  101  U.  S.  71; 
California  Bauk  v.  Kennedy,  167  U.  S.  362 ;  Marble  Co.  v. 
Harvey,  92  Tennessee,  116;  Union  Pacific  Railway  v.  Chicago, 
Rock  island  and  Pacific  Railway  Co.,  163  U.  S.  564. 

"The  doctrine  that  no  recovery  can  be  had  upon  the  con- 
tract is  based  upon  the  theory  that  it  is  for  the  interest  of  the 
public  that  corporations  should  not  transcend  the  limits  of 
their  charters;  that  the  property  of  stockholders  should  not 
be  put  to  the  risk  of  engagements  which  they  did  not  under- 
take ;  that  if  the  contract  be  prohibited  by  statute,  everyone 
dealing  with  the  corporation  is  bound  to  take  notice  of  the 


153  CONSOLIDATION   AND    MERGER.  §  181 

restrictions  in  its  charter,  whether  such  charter  be  a  private 
act  or  a  general  law  under  which  corporations  of  this  class  are 
organized.  Zabriskie  v.  Cleveland  etc.  Railroad,  23  How. 
381,  398;  Thomas  v.  Railroad  Co.,  101  U.  S.  71;  Pennsvlvania 
Co.  V.  St.  Louis,  Alton  &  Terre  Haute  Railroad,  118  U.  S.  290, 
G30 ;  Oregon  Railway  Co.  v.  Oregonian  Railway  Co.,  130  U.  S, 
1,  25 ;  Railway  Companies  v.  Keokuk  Bridge  Co.,  131  U.  S.  371, 
384. 

"As  the  action  in  this  ease  is  upon  the  contract,  and  as  the 
contract  was  prohibited  by  the  charter  of  the  Refrigerating 
Company,  there  can  be  no  recovery  upon  it."  (Valley  R.  Co. 
V.  Lake  Erie  Iron  Co.,  46  Ohio  St.  44;  Holmes  &  G.  Mfg.  Co. 
V.  Holmes  Metal  Co.,  127  N.  Y.  252;  Mechanics  &  W.  Mut. 
Sav.  &  Building  Assn.  v.  Meriden  Agency  Co.,  24  Conn.  159 ; 
Talmage  v.  Pell,  7  N.  Y.  328 ;  Franklin  Co.  v.  Lewiston  Sav. 
Inst.,  68  Me.  43;  First  Nat.  Bank  of  Charlotte  v.  National 
Exch.  Bank,  92  U.  S.  122 ;  People  v.  Chicago  Gas  Trust  Co., 
130  111.  268.) 

§  181.  But  though  a  corporation  has  no  power  to  acquire 
and  hold  stock  in  another  corporation,  such  power  is  implied 
as  of  necessity  in  cases  where  it  be  necessary  in  order  to  ob- 
tain payment  of  debt,  the  stock  being  taken  not  to  be  held,  but 
to  be  disposed  of  and  realized  in  cash.  (First  Nat.  Bank  v. 
National  Bank,  92  U.  S.  128 ;  Howe  v.  Boston  Carpet  Co.,  16 
Gray,  495 ;  Hodges  v.  New  England  Screw  Co.,  1  R.  I.  312 ; 
Taylor  County  Ct.  v.  Baltimore  &  0.  R.  Co.,  35  Fed.  161.) 

In  First  Nat.  Bank  v.  Nat.  Exch.  Bank,  92  U.  S.  122,  in 
holding  that  a  corporation  not  authorized  to  purchase  and  hold 
stock  in  other  companies  might  accept  stock  in  satisfaction  of  a 
doubtful  debt  with  a  view  to  its  reduction  into  money  to  pre- 
v^ent  anticipated  loss,  Waite,  C.  J.,  said  (p.  128)  : 

"Dealing  in  stocks  is  not  expressly  prohibited;  but  such  a 
prohibition  is  implied  from  the  failure  to  grant  the  power.  In 
the  honest  exercise  of  the  power  to  compromise  a  doubtful 
debt  owing  to  a  bank,  it  can  hardly  be  doubted  that  stocks 
may  be  accepted  in  payment  and  satisfaction,  with  a  view  to 
their  subsequent  sale  or  conversion  into  money  so  a^  to  make 
good  or  reduce  an  anticipated  loss.  Such  a  transaction  would 
not  amount  to  a  dealing  in  stocks.  It  Avas,  in  efpect,  so  de- 
cided in  Fleckner  v.  Bank  U.  S.,  8  Wheat.  351,  where  it  was 
held  that  a  prohibition  against  trading  and  dealing  was  noth- 
ing more  than  a  prohibition  against  engaging  in  the  ordinary 


§  182  SUMMARY    OF    CORPORATION    LAW.  15-4 

business  of  buying  and  selling  for  profit,  and  did  not  include 
purchases  resulting  from  ordinary  banking  transactions.  For 
this  reason,  among  others,  the  acceptance  of  an  indorsed  note 
in  payment  of  a  debt  due  was  decided  not  to  be  a  'dealing'  in 
notes.  Of  course,  all  such  transactions  must  be  compromises 
in  good  faith,  and  not  mere  cloaks  or  devices  to  cover  un- 
authorized practices." 

§  182.  A  corporation  may  not  acquire  its  own  stock  ordi- 
narily unless  authorized  by  statute,  for  a  purchase  of  its  own 
stock  is  tantamount  to  a  decrease  of  its  capital.  (Johnston  v. 
Allis,  71  Conn.  207;  Holladay  v.  Elliott,  8  Or.  84;  Oliver  v. 
Rahway  Ice  Co.,  64  N.  J.  Eq.  596.)  If  authorized,  however., 
the  corporation,  acting  in  good  faith,  may  buy  and  sell  its  own 
shares  of  stock.  (Republic  L.  Ins.  Co.  v.  Swigert,  135  111.  150; 
First  Nat.  Bank  of  Salem  v.  Salem  Capital  Flour-mills,  39 
Fed.  89 ;  Blalock  v.  Kernersville  Mfg.  Co.,  110  N.  C.  99 ;  Iowa 
Lumber  Co.  v.  Foster,  49  Iowa,  25 ;  Oliver  v.  Rahway  Ice 
Co.,  64  N.  J.  Eq.  596.)  So  a  corporation  may  acquire  its 
own  stock  where  necessary  in  order  to  obtain  payment  of  a 
debt.  (Columbus  City  Bank  v.  Bruce,  17  N.  Y.  507;  Tay- 
lor v.  Miami  Exporting  Co.,  6  Ohio,  176 ;  Union  Nat.  Bank 
v.  Hunt,  7  Mo.  App.  42.)  But  a  corporation  cannot  ac- 
quire its  own  stock  to  the  prejudice  of  its  creditors.  (Heg- 
gie  V.  People's  Bldg.  &  Loan  Assn.,  107  N.  C.  581;  St. 
Louis  Carriage  Mfg.  Co.  v.  Hilbert,  24  Mo.  App.  338,  and 
authorities  supra.  For  further  authorities,  see  Thompson, 
2d  ed.,  §§  650-654;  18  L.  R.  A.  252,  note;  61  L.  R.  A.  621; 
note.)j 


155  EECBIVERS.  §§  185, 186 


CHAPTER  IX. 

RECEIVERS. 

§  185.  A  receiver  is  an  officer  of  the  court,  and  is  appointed 
by  the  court  in  a  pending  suit  or  proceeding  to  take  custody, 
possession,  or  title,  as  the  case  may  be,  to  certain  property 
which  is  of  the  subject  matter  of  the  pending  litigation,  for 
the  safe-keeping,  preservation  and,  where  necessary,  realiza- 
tion of  the  property  in  money,  and  for  the  benefit  of  those 
persons,  parties  to  the  litigation  or  others,  who  may  be  de- 
termined in  the  litigation  to  be  entitled  to  it. 

It  is  to  be  borne  in  mind  that  a  receiver  is  merely  the 
agent  or  arm  of  the  court,  and  that  property  in  the  hands 
of  a  receiver  is  in  the  possession  of  the  court,  in  custodia 
legis.  A  receivership  is  not  an  end  in  itself,  is  not  final 
relief  in  itself,  but  is  incidental  merely  to  some  equitable 
relief  prayed,  and  is  in  fact  a  means  to  an  end,  an  instru- 
mentality adopted  by  the  court  to  conserve  property  in  order 
that  relief  prayed  for  in  a  pending  suit  may  be  effectual 
when  decreed,  and  may  not  be  rendered  futile  by  the  waste, 
destruction  or  misappropriation  of  the  subject-matter  prop- 
erty during  the  time  required  for  the  determination  of  the 
subject  of  the  suit. 

§  186.  The  rights,  duties  and  powers  of  a  receiver  are  limi- 
ted by  the  terms  of  the  order  appointing  the  receiver  which  in 
turn  is  limited  in  its  extent  and  scope  by  the  jurisdiction 
of  the  court  over  the  parties,  over  the  subject  matter  of  the 
suit  and  over  the  subject-matter  property  usually  governed 
by  the  statute  authorizing  the  appointment  of  the  receiver. 
From  this  it  is  not  to  be  inferred  that  the  jurisdiction  to 
appoint  a  receiver  is  always  statutory.  On  the  contrary, 
wherever  the  jurisdiction  of  a  court  of  equity  extends  to  the 
determination  of  rights  to  specific  property,  it  will,  in  a 
proper  case,  appoint  a  receiver  to  conserve  the  property 
pending  the  determination  of  its  final    disposition.     In  the 


§  187  SUMMARY    OF    CORPORATION   LAW.  156 

absence  of  statutory  provision,  however,  a  receiver  is  a  cus- 
todian merely,  and  takes  neither  title  nor  right  of  posses- 
sion, except  the  relative  right  of  the  parties  to  the  suit. 
Since,  therefore,  a  receiver  is  the  custodian  of  the  court, 
limited  in  his  powers  and  functions  by  the  jurisdiction  of 
the  court  in  its  territorial  extent  as  well  as  otherwise,  a  re- 
ceiver of  a  corporation  has  a  right  to  the  custody  of  only 
such  property  of  the  corporation  as  is  within  the  territorial 
jurisdiction  of  the  court,  except  in  cases  where,  by  virtue 
of  a  statute  or  otherwise,  the  court  gets  such  jurisdiction 
of  the  corporate  entity  itself  that  it  can  and  does  clothe  the 
receiver  either  with  title  or  right  to  possession  generally  as 
distinct  from  mere  custody  of  the  property  of  the  corpora- 
tion wherever  located.  In  cases  where  suits  are  pending 
in  different  courts,  the  custody  of  one  receiver  once  ob- 
tained will  not  be  ousted  nor  interfered  with  except  through 
an  application  made  and  passed  upon  by  the  court  appoint- 
ing the  receiver  whose  right  of  custody  is  in  question ;  this 
rule  is  based  on  the  comity  of  procedure  and  respect  of  one 
judicial  tribunal  for  another  and  on  the  necessity  of  a  digni- 
fied and  decorous  administration  of  justice.  Whether  a 
receiver  will  be  appointed  in  a  particular  case  will  depend 
on  two  considerations — (1)  whether  the  court  in  which  the 
application  is  made  has  jurisdiction;  (2)  whether  the  ap- 
pointment of  a  receiver  is  necessary  to  conserve  the  prop- 
erty in  question. 

§  187.  Since  a  receivership  is  not  competent  relief  in  itself, 
the  jurisdiction  of  the  court  depends  on  whether  a  suit  is  pend- 
ing or  may  be  instituted  for  some  relief  like  an  accounting 
or  reduction  of  assets  in  a  judgment  creditor's  suit  or  other 
relief  recognized  as  proper ;  then  the  party  or  parties  plain- 
tiff must  be  shown  to  have  a  standing  in  court  to  ask  for  the 
relief  prayed,  and  jurisdiction  over  the  defendant  corpora- 
tion or  its  property  must  be  had  in  fact  or  at  least  obtain- 
able. For  example,  whatever  might  be  the  merits,  a  simple 
contract  creditor  would  have  no  standing  to  institute  or 
maintain  a  pending  suit  for  the  appointment  of  a  receiver 


157  RECEIVERS.  §§  188, 189 

and  the  application  of  assets  of  an  insolvent  corporation, 
since  he  must  first  reduce  his  claim  to  judgment  in  order 
to  be  in  a  position  to  ask  the  equitable  relief  recognized  as 
competent  in  a  judgment  creditor's  bill.  Again,  the  court 
Avould  not  have  jurisdiction  and  would  not  appoint  a  re- 
ceiver of  a  foreign  corporation  not  doing  business  in  the 
state,  not  having  submitted  itself  to  the  jurisdiction  and  not 
having  property  within  the  territorial  jurisdiction  of  the 
court.  On  the  otlier  hand,  in  a  suit  by  a  judgment  creditor 
pending  or  about  to  be  instituted  against  an  insolvent  do- 
mestic corporation  to  compel  payment  of  unpaid  subscrip- 
tions by  stockholders,  the  court  would  have  jurisdiction  and 
in  a  proper  case  will  appoint  a  receiver. 

§  188.  Whether  the  appointment  of  a  receiver  is  proper 
depends  on  all  the  circumstances  as  to  the  necessity  for  such  in- 
terference by  the  court  with  the  possession  of  the  corporation 
or  other  party.  Mere  insolvency  of  a  corporation  without 
more  is  not  sufficient,  though  usually  where  a  corporation 
is  insolvent  sufficient  will  exist  to  constitute  a  proper  case 
and  warrant  the  interference  by  the  court. 

The  appointment  of  a  receiver  by  a  court  having  juris- 
diction of  the  parties  and  the  subject  matter  is  discretionary 
with  the  court,  but  since  by  such  appointment  the  court 
interferes  with  the  possession  of  its  property  by  a  corpora- 
tion or  other  party,  a  case  must  be  made  out  showing  the 
necessity  therefor  and  that  on  all  the  facts  and  circumstances 
a  receiver  is  in  fact  necessary  to  conserve  the  property  for 
all  the  parties  in  interest.  In  such  case  the  court  will  ap- 
point a  receiver,  with  right  of  possession  or  custody  dating 
from  the  appointment,  either  temporarily  or  permanent,  as 
the  case  may  require,  to  conserve,  safeguard  and  realize  the 
property  of  the  corporation  party  defendant,  of  course  sub- 
ject to  the  further  orders  of  the  court. 

§  189.  In  holding  that  a  statutory  receiver  of  a  corporation 
takes  the  title  given  by  the  statute  to  all  the  corporate  prop- 
erty wherever  situated,  Waite,  J.,  in  Relf  e  v.  Rundle,  103  U.  S. 
222  (p.  225),  said: 


§  190  SUMMARY   OF    CORPORATION   LAW.  158 

"We  are  aware  that  except  by  virtue  of  some  statutory 
authority,  an  administrator  appointed  in  one  state  cannot 
generally  sue  in  another,  and  that  a  receiver  appointed  by 
a  state  court  has  no  extraterritorial  power;  but  a  corpora- 
tion is  the  creature  of  legislation  and  may  be  endowed  with 
such  powers  as  its  creator  sees  fit  to  ^ive.  Necessarily  it 
must  act  through  agents,  and  the  state  which  creates  it 
may  say  who  those  agents  shall  be.  One  may  be  its  repre- 
sentative when  in  active  operation  and  in  full  possession  of 
its  powers,  and  another  if  it  has  forfeited  its  charter  and 
has  no  lawful  existence  except  to  wind  up  its  affairs.  No 
state  need  allow  the  corporations  of  other  states  to  do  busi- 
ness within  its  jurisdiction  unless  it  chooses,  with  perhaps 
the  exception  of  commercial  corporations ;  but  if  it  does 
without  limitation,  express  or  implied,  the  corporation  comes 
in  as  it  has  been  created.  Every  corporation  necessarily 
carries  its  charter  wherever  it  goes,  for  that  is  the  law  of 
it  existence.  It  may  be  restricted  in  the  use  of  some  of  its 
powers  Avhile  doing  business  away  from  its  corporate  home, 
but  every  person  who  deals  with  it  everywhere  is  bound  to 
take  notice  of  the  provisions  which  have  been  made  in  its 
charter  for  the  management  and  control  of  its  affairs  both 
in  life  and  after  dissolution." 

§  190.  Where  the  court  had  placed  a  railroad  in  the  hands 
of  its  receiver  and  operated  it  at  the  suit  of  an  unsecured  judg- 
ment creditor,  Harlan,  J.,  holding  that  such  creditor  was 
entitled  to  have  his  debt  satisfied  out  of  earnings  in  the 
hands  of  the  receiver  as  against  a  trustee  under  a  mortgage 
in  Sage  v.  Memphis  etc.  R.  R.  Co.,  125  U.  S.  361,  said  (p.  376)  : 

"In  the  present  case  it  is  true  Sage  did  not  sue  out  execu- 
tion upon  his  judgment  and  have  a  return  of  nulla  bona. 
But  that  point  has  become  immaterial.  The  railroad  com- 
pany made  no  such  objection  at  the  time  the  receiver  was 
appointed.  Besides,  suing  out  an  execution  would,  accord- 
ing to  the  facts  and  the  admission  of  the  parties,  have  been 
an  idle  ceremony,  causing  useless  expense,  and  bringing  no 
real  benefit  to  the  plaintiff.  It  is  true,  also,  that  Sage  did 
not  sue  in  behalf  of  all  the  creditors  of  the  company  or  of 
such  as  might  come  in  and  contribute  to  the  expense  of  the 
litigation.  He  \vas  not  bound  to  pursue  that  course.  It  was 
his  privilege  under  the  law  to  sue  for  his  own  benefit,  and 
it  was  within  the  power  of  the  court  for  his  protection  as 
a  judgment  creditor  to  place  the  property  of  the  debtor 
company  in  the  hands  of  a  receiver  for  administration  under 


159  RECEIVERS.  §  191 

its  orders.  "We  do  not  mean  to  say  that  a  single  judgment 
creditor  or  an}'  number  of  such  creditors  of  a  railroad  com- 
pany are  entitled,  as  a  matter  of  right,  to  have  its  property 
put  in  the  hands  of  a  receiver  merely  because  of  its  failure 
or  refusal  to  pay  its  debts.  Whether  a  receiver  shall  be 
appointed  is  always  a  matter  of  discretion  to  be  exercised 
sparingly  and  with  great  caution  in  the  case  of  quasi-public 
corporations  operating  a  public  highway,  and  always  with 
reference  to  the  special  circumstances  of  each  case  as  it 
arises.  All  that  Ave  say  in  this  connection  is  that  under  the 
circumstances  presented  in  this  case  the  appointment  of 
the  receiver  was  within  the  power  of  the  court." 

§  191.  In  holding  that  a  simple  contract  creditor  could  not 
maintain  a  suit  in  equity  against  an  insolvent  corporation  for 
the  appointment  of  a  receiver  and  distribution  of  assets  of  the 
corporation,  Brewer,  J.,  in  Ilollins  v.  Brierfield  Coal  &  Iron 
Co.,  150  U.  S.  371,  said  (p.  378)  : 

"The  plaintiffs  were  simple  contract  creditors  of  the  com- 
pany; their  claims  had  not  been  reduced  to  judgment,  and 
they  had  no  express  lien  by  mortgage,  trust  deed  or  other- 
wise. It  is  the  settled  law  of  this  court  that  such  creditors 
cannot  come  into  a  court  of  equity  to  obtain  the  seizure  of 
the  property  of  their  debtor  and  its  application  to  the  satis- 
faction of  their  claims;  and  this,  notwithstanding  a  statute 
of  the  state  may  authorize  such  a  proceeding  in  the  courts 
of  the  state.  The  line  of  demarcation  betv/een  equitable  and 
legal  remedies  in  the  federal  courts  cannot  be  obliterated  by 
state  legislation.  Scott  v.  Neely,  140  U.  S.  106;  Cates  v. 
Allen,  149  U.  S.  451.  Nor  is  it  otherwise  in  case  the  debtor 
is  a  corporation  and  an  unpaid  stock  subscription  is  sought 
to  be  reached.  National  Tube  Works  Co.  v.  Ballon,  146 
U.  S.  517 ;  Swan  Land  &  Cattle  Co.  v.  Frank,  148  U.  S.  603. 
....  But  it  is  earnestly  insisted  that  it  has  been  held  by 
this  court  in  Case  v.  Beauregard,  101  U.  S.  688,  that  when- 
ever a  creditor  has  a  trust  in  his  favor,  or  a  lien  upon  prop- 
erty for  a  debt  due  him,  he  may  go  into  equity  without 
exhausting  his  legal  remedies ;  that  it  has  also  frequently 
been  affirmed  that  the  capital  stock  and  assets  of  a  cor- 
poration constitute  a  trust  fund  for  the  benefit  of  its  cred- 
itors which  neither  the  officers  nor  stockholders  can  divert 
or  waste,  and  several  cases  are  cited,  among  them  that  of 
Sanger  v.  Upton,  91  U.  S.  56,  in  which  perhaps  the  proposi- 
tion is  asserted  in  the  most  direct  and  emphatic  language, 
and  Terry  v.  Anderson,  95  U.  S.  628,  636,  in  which  Chief 


§  191  SUMMARY   OP   CORPORATION   LAW.  160 

Justice  Waite  made  these  observations:  'Ordinarily,  a  cred- 
itor must  put  his  demand  into  judgment  against  his  debtor 
and  exhaust  his  remedies  at  law  before  he  can  proceed  in 
equity  to  subject  choses  in  action  to  its  payment.  To  this 
rule,  however,  there  are  some  exceptions;  and  we  are  not 
prepared  to  say  that  a  creditor  of  a  dissolved  corporation 
may  not,  under  certain  circumstances,  claim  to  be  exempted 
from  its  operation.  If  he  can,  hoAvever,  it  is  upon  the  ground 
that  the  assets  of  the  corporation  constitute  a  tmst  fund 
which  will  be  administered  by  a  court  of  equity  in  the  ab- 
sence of  a  trustee ;  the  principle  being  that  equity  will  not 
permit  a  trust  to  fail  for  want  of  a  trustee.' 

"While  it  is  true  language  has  been  frequently  used  to 
the  effect  that  the  assets  of  a  corporation  are  a  trust  fund 
held  by  a  corporation  for  the  benefit  of  creditors,  this  has 
not  been  to  convey  the  idea  that  there  is  a  direct  and  express 
trust  attached  to  the  property.  As  said  in  2  Pomeroy's 
Equity  Jurisprudence,  section  1046,  they  'are  not  in  any 
true  and  complete  sense  trusts,  and  can  only  be  called  so 
by  v/ay  of  analogy  or  metaphor.'  To  the  same  effect  are 
decisions  of  this  court.  The  case  of  Graham  v.  Railroad  Co., 
102  U.  S.  148,  was  an  action  by  a  subsequent  creditor  to 
subject  certain  property  alleged  to  have  been  wrongfully 
conveyed  by  the  corporation  debtor  to  the  satisfaction  of 
his  judgment.  And  the  very  proposition  here  presented 
w^as  then  considered,  and  in  respect  to  it  the  court,  by  Mr. 
Justice  Bradley,  said  (p.  160):  'It  is  contended,  however, 
by  the  appellant  that  a  corporation  debtor  does  not  stand 
on  the  same  footing  as  an  individual  debtor;  that  whilst 
the  latter  has  supreme  dominion  over  his  own  property,  a 
corporation  is  a  mere  trustee,  holding  its  property  for  the 
benefit  of  its  stockholders  and  creditors ;  and  that  if  it  fail 
to  pursue  its  rights  against  third  persons,  whether  arising 
out  of  fraud  or  otherwise,  it  is  a  breach  of  trust,  and  cred- 
itors may  come  into  equity  to  compel  an  enforcement  of  the 
corporate  duty.  This,  as  we  understand,  is  the  substance  of 
the  position  taken. 

"  'We  do  not  concur  with  this  view.  It  is  at  war  with  the 
notions  which  we  derive  from  the  English  law  with  regard 
to  the  nature  of  corporate  bodies.  A  corporation  is  a  dis- 
tinct entity.  Its  affairs  are  necessarily  managed  by  officers 
and  agents,  it  is  true;  but  in  law  it  is  as  distinct  a  being 
as  an  Individual  is,  and  is  entitled  to  hold  property  (if  not 
contrary  to  its  charter)  as  absolutely  as  an  individual  can 
hold  it.  Its  estate  is  the  same,  its  interest  is  the  same,  its 
possession  is  the  same.     Its  stockholders  may  call  the  officers 


161  RECEIVERS.  §  191 

to  account,  and  may  prevent  any  malversation  of  funds 
or  fraudulent  disposal  of  property  on  their  part.  But  that 
is  done  in  the  exercise  of  their  corporate  rights,  not  adverse 
to  the  corporate  interests,  but  coincide  with  them.  When 
a  corporation  becomes  inS'Olvent,  it  is  so  far  civilly  dead 
that  its  property  may  be  administered  as  a  trust  fund  for 
the  benefit  of  its  stockholders  and  creditors.  A  court  of 
equity,  at  the  instance  of  the  proper  parties,  w^ill  then  make 
those  funds  trust  funds  which  in  other  circumstances  are 
as  much  the  absolute  property  of  the  corporation  as  any 
man's  property  is  his.' 

"With  reference  to  the  sugo:estion  in  this  last  paragraph 
it  may  be  observed  that  the  court  does  not  attempt  to  de- 
termine who  are  proper  parties  to  maintain  a  suit  for  the 
administration  of  the  assets  of  an  insolvent  corporation.  All 
that  it  decides  is  that  when  a  court  of  equity  does  take  into 
its  possession  the  assets  of  an  insolvent  corporation,  it  will 
administer  them  on  the  theory  that  they  in  equity  belong 
to  the  creditors  and  stockholders  rather  than  to  the  corpo- 
ration itself.  In  other  words,  and  that  is  the  idea  wdiich 
underlies  all  these  expressions  in  reference  to  'trust'  in  con- 
nection with  the  property  of  a  corporation,  the  corporation  is 
an  entity,  distinct  from  its  stockholders  as  from  its  creditors. 
Solvent  it  holds  its  property  as  any  individual  holds  his,  free 
from  the  touch  of  a  creditor  who  has  acquired  no  lien ;  free, 
also,  from  the  touch  of  a  stockholder,  who,  though  equitably 
interested  in,  has  no  legal  right  to,  the  property.  Becom- 
ing insolvent  the  equitable  interest  of  the  stockholders  in 
the  property,  together  wuth  their  conditional  liability  to 
the  creditors,  places  the  property  in  a  condition  of  trust 
first  for  the  creditors  and  then  for  the  stockholders.  What- 
ever of  trust  there  is  arises  from  the  peculiar  and  diverse 
equitable  rights  of  the  stockholders  as  against  the  corpo- 
ration in  its  property  and  their  conditional  liability  to  its 
creditors.  It  is  rather  a  trust  in  the  administration  of  the 
assets  after  possession  by  a  court  of  equity  than  a  trust 
attaching  to  the  property  as  such  for  the  direct  benefit  of 
either  creditor  or  stockholder 

"A  party  may  deal  with  a  corporation  in  respect  to  its 
property  in  the  same  manner  as  with  an  individual  owner, 
and  with  no  greater  danger  of  being  held  to  have  received 
into  his  possession  property  burdened  with  a  trust  or  lien. 
The  officers  of  a  corporation  act  in  a  fiduciary  capacity  in 
respect  to  its  property  in  their  hands,  and  may  be  called  to 
an  account  for  fraud  or  sometimes  even  mere  mismanage- 
ment in  respect  thereto ;  but  as  betw^een  itself  and  its  cred- 
11 


§  192  SUMMARY    OF   CORPORATION   LAW.  162 

itors  the  corporation  is  simply  a  debtor,  and  does  not  hold  its 
properly  in  trust  or  subject  to  a  lien  in  their  favor  in  any 
other  sense  than  does  an  individual  debtor.  That  is  cer- 
tainly the  general  rule,  and  if  there  be  any  exceptions 
thereto,  they  are  not  presented  by  any  of  the  facts  in  this 
case.  Neither  the  insolvency  of  the  corporation  nor  the 
execution  of  an  illegal  trust  deed,  nor  the  failure  to  collect 
in  full  all  stock  subscriptions,  nor  all  together,  gave  to  these 
simple  contract  creditors  any  lien  upon  the  property  of  the 
corporation,  nor  charged  any  direct  trust  thereon." 

§  192.  "Where  a  state  court  had  appointed  a  receiver  of  the 
property  of  a  corporation,  Gray,  J.,  in  holding  a  stockholder's 
bill  in  the  federal  court  not  making  the  receiver  party  de- 
fendant demurrable  for  that  reason,  and  for  the  further 
reason  that  a  federal  court  would  not  interfere  where  a 
state  court  had  taken  jurisdiction  and  possession  through 
its  receiver,  in  Porter  v.  Sabin,  149  U.  S.  473,  said  (p.  479)  : 

"When  a  court  exercising  jurisdiction  in  equity  appoints 
a  receiver  of  all  the  propert}^  of  a  corporation,  the  court  as- 
sumes the  administration  of  the  estate ;  the  possession  of  the 
receiver  is  the  possession  of  the  court,  and  the  court  itself 
holds  and  administers  the  estate,  through  the  receiver  as  its 
officer,  for  the  benefit  of  those  whom  the  court  shall  ulti- 
mately adjudge  to  be  entitled  to  it.  Wiswall  v.  Sampson, 
14  How.  52,  65;  Peale  v.  Phipps,  14  How.  368,  374;  Booth 
v.  Clark,  17  How.  322,  331 ;  Union  Bank  v.  Kansas  City  Bank, 
136  U.  S.  223;  Thompson  v.  Phenix  Ins.  Co.,  136  U.  S.  287, 
297.  It  is  for  that  court,  in  its  discretion,  to  decide  whether 
it  will  determine  for  itself  all  claims  of  or  against  the  re- 
ceiver, or  will  allow  them  to  be  litigated  elsewhere.  It 
may  direct  claims  in  favor  of  the  corporation  to  be  sued  on 
by  the  receiver  in  other  tribunals,  or  may  leave  him  to  ad- 
just and  settle  them  without  suit,  as  in  its  judgment  may  be 
most  beneficial  to  those  interested  in  the  estate.  Any  claim 
against  the  receiver  or  the  corporation  the  court  may  permit 
to  be  put  in  suit  in  another  tribunal  against  the  receiver  or 
may  reserve  to  itself  the  determination  of;  and  no  suit, 
unless  expressly  authorized  by  statute,  can  be  brought 
against  the  receiver  without  the  permission  of  the  court 
which  appointed  him.  Barton  v.  Barbour,  104  U.  S.  126; 
Texas  &  Pacific  Ry.  v.  Cox,  145  U.  S.  593,  601.  The  rea- 
sons are  yet  stronger  for  not  alloAving  a  suit  against  a  re- 
ceiver appointed  by  a  state  court  to  be  maintained,  or  the 


163  EECEIVERS.  §  192 

administration  by  that  court  of  the  estate  in  the  receiver's 
hands  to  be  interfered  with  by  a  court  of  the  United  States 
deriving  its  authority  from  another  government,  though  ex- 
ercising jurisdiction  over  the  same  territory.  The  whole 
property  of  the  corporation  within  the  jurisdiction  of  the 
court  which  appointed  the  receiver,  including  all  its  rights 
of  action,  except  so  far  as  already  lawfully  disposed  of  under 
orders  of  that  court,  remains  in  its  custody  to  be  administered 
and  distributed  by  it.  Until  the  administration  of  the  es- 
tate has  been  completed  and  the  receivership  terminated  no 
court  of  the  one  government  can  by  collateral  suit  assume 
to  deal  with  rights  of  property  or  of  action  constituting  part 
of  the  estate  within  the  exclusive  jurisdiction  and  control 
of  the  courts  of  the  other.  Wiswall  v.  Sampson,  Peale  v. 
Phipps  and  Barton  v.  Barbour  above  cited;  Williams  v.  Bene- 
dict, 8  How.  107;  Pulliam  v.  Osborne,  17  How.  471,  475; 
People's  Bank  v.  Calhoun,  102  U.  S.  256;  Heidritter  v.  Eliza- 
beth Oil  Cloth  Co.,  112  U.  S.  294;  In  re  Tyler,  ante,  164." 


§§  195,  196  SUMMARY   OF   CORPORATION   LAW.  164 


CHAPTER  X. 

TERMINATION  OF  CORPORATE  EXISTENCE. 

§  195.  The  termination  of  a  corporation,  like  all  matters  of 
corporation  law,  is  governed  by  the  terms  of  the  controlling 
statute. 

A  corporation  is  terminated  in  one  of  three  ways:  (1) 
by  the  expiration  of  the  term  of  corporate  existence  set  in 
the  charter;  (2)  by  voluntary  dissolution;  and  (3)  by  forced 
dissolution  or  forfeiture. 

At  the  time  positively  set  by  the  statute,  with  due  refer- 
ence to  the  period  fixed  by  the  charter,  as  the  limit  of  the 
corporate  existence,  the  corporation  ceases  ipso  facto  to 
exist.  Where,  however,  it  is  provided  by  the  statute  that 
the  charter  shall  be  forfeited  or  become  void  or  other  pro- 
vision is  made  by  the  statute  for  the  termination  on  the  per- 
formance or  failure  to  perform  certain  acts  within  the  stated 
period  of  corporate  existence,  such  provisions  are  generally 
construed  not  to  be  self-executing,  and  the  corporation  is 
not  in  such  case  ipso  facto  terminated,  and  its  charter  is 
simply  held  to  be  voidable  on  the  institution  by  the  state 
of  a  proper  proceeding  for  the  purpose. 

It  was  formerly  questioned  whether  in  case  of  termina- 
tion of  a  corporation  the  corporate  property  and  assets  re- 
verted to  the  grantor  or  donor,  or  escheated  to  the  state,  or  be- 
longed to  the  stockholders  or  members  of  the  corporation 
and  should  be  divided  among  them. 

§  196.  It  is  now,  however,  clearly  established  that  in  case 
of  dissolution  or  forfeiture  or  other  termination  of  the  corpora- 
tion its  capital  assets  and  property  are  to  be  reduced  to 
cash,  and  after  payment  of  the  corporate  debts  are  to  be  dis- 
tributed among  the  stockholders  or  members  of  the  cor- 
poration. This  purpose  is  accomplished  in  different  ways. 
In  most  jurisdictions  it  is  now  provided  by  statute  that  the 
positive  limit  of  corporate  existence  shall  not  be  reached 


165  TERMINATION  OF  CORPORATE  EXISTENCE.       §§  197,  198 

until  the  assets  have  been  reduced  and  the  corporate  debts 
paid,  it  being  usually  provided  that  until  then  the  corpora- 
tion shall  continue  in  existence  for  the  purpose  of  suing  or 
being  sued,  or  that  the  trustees  or  directors,  as  the  case 
may  be,  shall  be  continued  in  office  for  the  reduction  of  as- 
sets and  payment  of  debts,  or  both.  In  case  the  corporation 
has  actually  terminated  under  the  statute,  the  court  will 
appoint  a  receiver  or  trustee  to  wind  up  the  corporate  affairs, 
in  a  proper  proceeding  instituted  for  that  purpose.  In  any 
event,  and  whatever  the  method  and  manner  of  the  termina- 
tion of  corporate  existence,  the  court  will,  at  the  instance  of 
judgment  creditors  or  stockholders,  appoint  a  receiver  to  con- 
serve and  safeguard  assets  where  the  case  shows  a  necessity 
for  such  appointment.  Likewise,  in  any  event  the  stockholders 
and  members  of  a  corporation  on  its  termination  are  prac- 
tically cotenants,  entitled  to  divide  the  corporate  property  and 
assets  remaining  after  the  payment  of  the  corporate  debts  and 
obligations. 

§  197.  In  holding  that  a  bank  is  not  dissolved  by  the  ap- 
pointment of  a  receiver  on  the  failure  of  the  bank  to  pay  its 
circulating  notes,  Clifford,  J.,  in  Bank  of  Bethel  v.  Pahquioque 
Bank,  14  Wall.  383,  p.  400,  said: 

"Beyond  doubt  the  appointment  of  a  receiver  supersedes 
the  power  of  the  directors  to  exercise  the  incidental  powers 
necessary  to  carry  on  the  business  of  banking,  as  the  re- 
ceiver is  required  to  take  possession  of  the  books,  records  and 
assets  of  every  description  of  the  association,  and  from  that 
moment  the  association  is  forbidden  to  pay  out  any  of  its 
notes,  discount  any  notes  or  bills,  or  otherwise  prosecute  the 
business  of  banking,  but  the  corporate  franchise  of  the  asso- 
ciation is  not  dissolved,  and  the  association  as  a  legal  entity 
continues  to  exist,  as  is  shown  to  a  demonstration  by  the  fact 
that  it  is  required  safely  to  keep  the  money  on  hand  belong- 
ing to  it,  and  may  deliver  special  deposits  in  its  keeping  to 
the  rightful  owners." 

§  198,  In  holding  that  a  ground  of  forfeiture  of  the  char- 
ter could  not  be  taken  advantage  of  by  an  individual  but  only 
by  the  state  in  a  judicial  proceeding  for  a  dissolution.  Nelson, 
J.,  in  Frost  v.  Frostburg  Coal  Co.,  24  How.  278,  p.  283,  said : 


§§  199,  200  SUMMARY   OF   CORPORATION   LAW.  166 

"Without  pursuing  the  case  further,  the  main  ground  upon 
which  we  intend  to  place  the  judgment  of  the  court  is,  that 
the  defendants  were  made  a  corporation  by  the  charter,  the 
persons  named  in  it  constituting  the  corporate  body,  clothed 
with  the  powers  and  privileges  conferred  upon  it,  and  were 
capable  of  taking  and  holding  real  estate;  and,  second,  even 
if  it  were  otherwise,  and  some  irregularities  occurred  in  the 
organization  of  the  company,  inasmuch  as  no  act  made  a  con- 
dition precedent  to  the  existence  of  the  corporation  has  been 
omitted,  or  its  nonperformance  shown,  a  party  dealing  with 
the  company  is  not  permitted  to  set  up  the  irregularity.  The 
courts  are  bound  to  regard  it  as  a  corporation,  so  far  as  third 
persons  are  concerned,  until  it  is  dissolved  by  a  judicial  pro- 
ceeding on  behalf  of  the  government  that  created  it." 

§  199.  In  holding  that  where  a  corporation  was  dissolved 
by  a  quo  warranto  proceeding  forfeiting  its  charter  and  its 
property  turned  over  to  a  trustee,  the  stockholders  were  en- 
titled to  maintain  a  bill  in  equity  against  the  trustee  for  an 
accounting,  Campbell,  J.,  in  Bacon  et  al.  v.  Robertson  et  al.,  18 
How.  (U.  S.)  480,  after  an  elaborate  examination  of  English 
authorities,  said  (p.  488)  : 

"All  the  other  trusts  having  been  fulfilled,  the  stockholders 
are  entitled  to  such  an  administration  as  will  be  most  bene- 
ficial to  them,  or  to  a  sale  of  the  trust  property  in  the  manner 
prescribed  by  the  statute  of  Mississippi.  Nor  is  the  objection 
to  the  form  of  the  suit  tenable.  If  the  trust  estate  had  been 
liquidated  and  the  interests  of  the  stockholders  ascertained, 
any  stockholder  might  have  maintained  a  suit  for  his  aliquot 
share  without  including  any  other  stockholder.  Smith  v. 
Snow,  3  Mad.  C.  R.  310." 

§  200.  In  holding  a  debt  due  the  corporation  not  extin- 
guished by  forfeiture  of  the  charter,  Davis,  J.,  in  Lum  v. 
Robertson,  6  Wall.  277,  p.  279,  said : 

"The  decision  of  this  court  in  Bacon  et  al.  v.  Robertson  dis- 
poses of  this  case. 

"The  Commercial  Bank  of  Natchez,  Mississippi,  by  judicial 
forfeiture,  was  deprived  of  its  charter,  and  Robertson  ap- 
pointed a  trustee  to  wind  up  its  affairs.  In  discharge  of  his 
trust,  having  paid  all  the  debts  of  the  insolvent  corporation, 
a  large  surplus  remained.  The  object  of  the  suit  in  Bacon  v. 
Robertson  was  to  establish  the  title  of  the  stockholders  to  this 
surplus.    Robertson  refused  to  distribute  the  effects  in  his 


167  TERMINATION   OF    CORPORATE   EXISTENCE.       §§201,202 

hands,  claiming  that,  since  the  dissolution  of  the  corporation, 
the  stockholders  had  no  rights  which  this  court  could  recognize. 
But  the  court  in  an  elaborate  opinion  decide  that  the  trustee 
cannot  deny  the  title  of  the  stockholders  to  a  distribution,  and 
that,  by  the  laws  of  Mississippi  and  the  general  principles  of 
equity  jurisprudence,  the  surplus  of  the  assets  which  may  re- 
main after  the  payment  of  the  debts  and  expenses  belongs  to 

the  stockholders  of  the  bank Lum,  a  delinquent  debtor 

of  the  bank,  cannot  plead  the  extinguishment  of  his  debt  by 
the  judgment  of  forfeiture,  for  the  court  (in  the  case  cited) 
say  the  debt  exists  and  can  be  recovered,  and  that  it  is  the 
duty  of  the  trustee  to  reduce  the  property  of  the  bank  to 
money  and  distribute  it  among  the  stockholders." 

§  201.  In  holding  that  a  judgment  could  not  be  revived  by 
scire  facias  against  a  corporation  which  had  surrendered  its 
charter.  Story,  J.,  in  Mumma  v.  Potomac  Co.,  8  Pet.  280,  said 
(p.  286)  : 

**A  corporation  by  the  Yery  terms  and  nature  of  its  political 
existence  is  subject  to  dissolution,  by  a  surrender  of  its  cor- 
porate franchises,  and  by  a  forfeiture  of  them  for  willful  mis- 
user and  nonuser.  Every  creditor  must  be  presumed  to 
understand  the  nature  and  incidents  of  such  a  body  politic 
and  to  contract  with  reference  to  them.  And  it  would  be  a 
doctrine  new  in  the  law  that  the  existence  of  a  private  con- 
tract of  the  corporation  should  force  upon  it  a  perpetuity  of 
existence  contrary  to  public  policy  and  the  nature  and  objects 
of  its  charter. 

"The  obligation  of  those  contracts  survives;  and  the  cred- 
itors may  enforce  their  claims  against  any  property  belonging 
to  the  corporation  which  has  not  passed  into  the  haiads  of  bona 
fide  purchasers ;  but  is  still  held  in  trust  for  the  company  or 
for  the  stockholders  thereof,  at  the  time  of  its  dissolution  in 
any  mode  permitted  by  the  local  laws." 

§  202,  In  holding  that  a  state  could,  without  impairing  the 
obligation  of  its  contract,  perpetually  enjoin  an  insolvent  life 
insurance  company  from  doing  business  in  a  proceeding  insti- 
tuted to  terminate  its  existence,  Harlan,  J.,  in  Chicago  Life 
Ins.  Co.  V.  Needles,  113  U.  S.  574,  p.  580,  said : 

"The  right  of  the  plaintiff  in  error  to  exist  as  a  corpora- 
tion, and  its  authority,  in  that  capacity,  to  conduct  the  par- 
ticular business  for  which  it  was  created,  were  granted  subject 
to  the  condition  that  the  privileges  and  franchises  conferred 


§  203  SUMMARY   OP    CORPORATION   LAW.  168 

upon  it  should  not  be  abused,  or  so  employed  as  to  defeat  the 
ends  for  which  it  was  established,  and  that  when  so  abused  or 
misemployed,  they  might  be  withdrawn  or  reclaimed  by  the 
state,  in  such  way  and  by  such  modes  of  procedure  as  were 
consistent  with  law.  Although  no  such  condition  is  expressed 
in  the  company's  charter,  it  is  necessarily  implied  in  every 
grant  of  corporate  existence.  Terret  v.  Taylor,  9  Cranch,  43, 
51;  Angell  &  Ames  on  Corporations,  9tli  ed.,  §  774,  note." 
(See,  also,  Wells  Co.  v.  Gastonia  Cotton  Mfg.  Co.,  198  U.  S. 
177.) 

§  203.  In  holding  that  on  the  dissolution  of  a  corporation 
at  the  expiration  of  its  chartered  term  of  existence  each  stock- 
holder is  entitled  to  have  the  corporate  property  converted  into 
money  for  distribution  and  that  the  majority  of  the  stock- 
holders cannot  otherwise  dispose  of  the  property  without  the 
consent  of  each  minority  stockholder,  Miller,  J.,  in  Mason  v. 
Pewabic  Mining  Co.,  133  U.  S.  50,  p.  58,  said: 

"With  regard  to  the  main  question,  the  power  of  the  di- 
rectors and  of  the  ma.iority  of  the  corporation  to  sell  all  of 
the  assets  and  property  of  the  Pewabic  Mining  Company  to 
the  new  corporation  under  the  existing  circumstances  of  this 
case,  we  concur  with  the  circuit  court.  It  is  earnestly  argued 
that  the  majority  of  the  stockholders — such  a  relatively  large 
majority  in  interest — have  a  right  to  control  in  this  matter, 
especially  as  the  corporation  exists  for  no  other  purpose  but 
that  of  winding  up  its  affairs,  and  that,  therefore,  the  major- 
ity should  control  in  determining  what  is  for  the  interest  of 
the  whole,  and  as  to  the  best  manner  of  effecting  this  object. 
It  is  further  said  that  in  the  present  case  the  dissenting  stock- 
holders are  not  compelled  to  enter  into  a  new  corporation  with 
a  new  set  of  corporators,  but  have  their  option,  if  they  do  not 
choose  to  do  this,  to  receive  the  value  of  their  stock  in  money. 

"It  seems  to  us  that  there  are  two  insurmountable  objec- 
tions to  this  view  of  the  subject.  The  first  of  these  is  that 
the  estimate  of  the  value  of  the  property  which  is  to  be  trans- 
ferred to  the  new  corporation  and  the  new  set  of  stockholders 
is  an  arbitrary  estimate  made  by  this  majority,  and  without 
any  power  on  the  part  of  the  dissenting  stockholders  to  take 
part  or  to  exercise  any  influence  in  making  this  estimate. 
They  are  therefore  reduced  to  the  proposition  that  they  must 
go  into  this  new  company,  however  much  they  may  be  con- 
vinced that  it  is  not  likely  to  be  successful  or  whatever  other 
objections  they  may  have  to  becoming  members  of  that  cor- 
poration, or  they  must  receive  for  the  property  which  they 


169  TERMINATION    OF    CORPORATE   EXISTENCE.  §  203 

have  in  the  old  company  a  sum  which  is  fixed  by  those  who 
are  buying  them  out.  The  injustice  of  this  needs  no  comment. 
If  this  be  established  as  a  principle  to  govern  the  winding  up 
of  dissolving  corporations,  it  places  any  unhappy  minority,  as 
regards  the  interest  which  they  have  in  such  corporation, 
under  the  absolute  control  of  a  majority,  who  may  themselves, 
as  in  this  ease,  constitute  the  new  company,  and  become  the 
purchasers  of  all  the  assets  of  the  old  company  at  their  own 
valuation. 

"The  other  objection  is  that  there  is  no  superior  right  in 
two  or  three  men  in  the  old  company,  who  may  hold  a  pre- 
ponderance of  the  stock,  to  acquire  an  absolute  control  of  the 
whole  of  it,  in  the  way  which  may  be  to  their  interest,  or  which 
they  may  think  to  be  for  the  interest  of  the  whole.  So  far 
as  any  legal  right  is  concerned,  the  minority  of  the  stock- 
holders has  as  much  authority  to  say  to  the  majority  as  the 
majority  has  to  say  to  them,  'We  have  formed  a  new  company 
to  conduct  the  business  of  this  old  corporation,  and  we  have 
fixed  the  value  of  the  shares  of  the  old  corporation.  We  pro- 
pose to  take  the  whole  of  it  and  pay  you  for  your  shares  at 
that  valuation  unless  you  come  into  the  new  corporation  tak- 
ing shares  in  it  in  payment  of  your  shares  in  the  old  one.' 
When  the  proposition  is  thus  presented,  in  the  light  of  an 
offer  made  by  a  very  small  minority  to  a  very  large  majority 
who  object  to  it,  the  injustice  of  the  proposition  is  readily 
seen ;  yet  we  know  of  no  reason  or  authority  why  those  holcl- 
ing  a  majority  of  the  stock  can  place  a  value  upon  it  at  which 
a  dissenting  minority  must  sell  or  do  something  else  which 
they  think  is  against  their  interest  more  than  a  minority 
can  do. 

"We  do  not  see  that  the  rights  of  the  parties  in  regard  to 
the  assets  of  this  corporation  differ  from  those  of  a  partner- 
ship on  its  dissolution,  and  on  that  subject  Lindley  on  Partner- 
ship says,  book  3,  chapter  10,  section  6,  subdivision  4,  page 
555,  original  edition : 

"  'In  the  absence  of  a  special  agreement  to  the  contrary, 
the  right  of  each  partner  on  a  disfsolution  is  to  have  the  part- 
nership property  converted  into  money  by  a  sale,  even  though 
a  sale  may  not  be  necessary  to  the  payment  of  debts.  This 
mode  of  ascertaining  the  value  of  the  partnership  effects  is 
adopted  by  courts  of  ecjuity,  unless  some  other  course  can  be 
followed  consistently  with  the  agreement  between  the  part- 
ners, and,  even  where  the  partners  have  provided  that  their 
shares  shall  be  ascertained  in  some  other  way,  still  if,  owing  to 
any  cireiimstance,  their  agreement  in  this  respect  cannot  be 
carried  out,  or  if  their  agreement  does  not  extend  to  the  event 


§§  204,  205  SUMMARY   OF   CORPORATION   LAW.  170 

which  has  in  fact  arisen,  realization  of  the  property  by  a  sale 
is  the  only  alternative  which  a  court  of  equity  can  adopt. 
....  We  do  not  say  that  there  may  not  be  circumstances  pre- 
sented to  a  court  of  chancery  which  is  winding  up  a  dissolved 
corporation  and  distributing  its  assets  that  will  justify  a  de- 
cree ascertaining  their  value  or  the  value  of  certain  parts  of 
them  and  making  a  distribution  to  partners  or  stockholders  on 
that  basis ;  but  this  is  not  the  general  rule  by  which  the  prop- 
ertv  in  such  cases  is  disposed  of  in  the  absence  of  an  agree- 
ment.' " 


PERIOD  OF  CORPORATE  EXISTENCE. 

§  204.  The  period  of  existence  of  a  corporation  is  matter 
of  construction  of  the  charter,  and  where  no  time  is  specified 
other  than  to  give  "perpetual  succession,"  the  period  is  con- 
strued as  indefinite  (Snell  v.  Chicago,  133  111.  413;  State  ex 
rel.  Walker  v.  Payne,  129  Mo.  468)  ;  but  language  indicating  a 
particular  period  for  exercise  of  corporate  powers  will  con- 
trol (State  ex  rel.  Walker  v.  Payne,  129  Mo.  468),  and  the 
time  limited  may  be  extended  by  the  legislature  in  absence  of 
constitutional  restriction.  (Attorney  General  v.  Perkins,  73 
Mich.  303.)  Where  the  certificate  or  license  of  the  Secretary 
of  State  specifies  a  different  period  than  the  articles  of  agree- 
ment, the  certificate  governs  (Bushnell  v.  Consol.  Ice  Mach. 
Co.,  138  111.  67)  ;  and  in  case  the  articles  specify  a  period 
exceeding  the  period  authorized  or  permitted  by  statute,  the 
excess  period  is  merely  disregarded.  (People  v.  Cheese- 
man,  7  Colo.  376.) 

§  205.  On  the  expiration  of  the  time  limited  by  the  charter 
as  properly  construed,  the  corporation  is  at  an  end,  unless  its 
life  be  extended  by  the  legislature.  (Sturges  v.  Vanderbilt, 
73  N.  Y.  384;  Asheville  etc.  T.  v.  Aston,  92  N.  C.  578.)  An 
action  against  an  expired  company  is  properly  abated  (Bank 
V.  McLaughlin,  2  Cranch  C.  C.  20;  Foster  v.  Essex  Bank, 
16  Mass.  244;  People  v.  Anderson  etc.  Co.,  76  Cal.  190; 
Meilrel  v.  German  Sav.  Fund  Soc,  16  Ind.  181),  but  other- 
wise if  the  statute  has  extended  the  period  for  the  company 
to  wind  up  (Pomeroy  v.  State  Bank,  68  U.  S.  23;  Miller  v. 


171  TERMINATION    OF    CORPORATE   EXISTENCE.  §  205 

Newburg  Arrel  Coal  Co.,  31  W.  Va.  836;  Foster  v.  Essex 
Bank,  16  Mass.  244).  Estoppel  will  not  avail  to  prevent 
setting  up  expiration  of  corporate  existence.  (Ensey  v. 
Cleveland  &  St.  L.  R.  Co.,  10  Ind.  178 ;  Krutz  v.  Paola  Town 
Co.,  20  Kan.  397;  Dobson  v.  Simonton,  86  N.  C.  492;  Ft. 
Wayne  &  B.  Tump.  Co.  v.  Deam,  10  Ind.  563.) 

In  the  absence  of  express  statutory  limitation,  the  cor- 
poration continues  until  dissolved  by  decree  (People  v.  Cheese- 
man,  7  Colo.  376 ;  Brooklyn  Steam  Transit  Co.  v.  Brooklyn, 
78  N.  Y.  524),  but  where  the  charter  fixes  a  definite  time, 
the  corporation  at  the  time  fixed  ceases  without  decree  of 
court.  (People  v.  Anderson  etc.  Road  Co.,  76  Cal.  190,  18 
Pac.  308.  For  further  authorities,  see  Thompson,  2d  ed.,  § 
267;  33  L.  R.  A.  576,  note.) 


§§  210,  211  SUMMARY   OP    CORPORATION   LAW.  172 


CHAPTER  XI. 

FOREIGN  CORPORATIONS. 

§  210.  A  corporation  exists  only  within  the  territorial  jur- 
isdiction of  the  statute  under  which  it  is  created. 

It  may  be  and  is,  however,  recog'nized  in  other  states  or  ter- 
ritorial jurisdictions  as  so  existing  in  its  home  state,  and  it 
is  now  well  established  that  if  authorized  by  its  charter,  it 
may  through  agents  sue,  contract  and  otherwise  exercise  it? 
charter  powers  in  other  states,  unless  affirmatively  prohibited 
from  or  restricted  in  so  doing  by  the  statutes  of  the  extra- 
territorial state  or  jurisdiction.  A  corporation  in  its  outside 
dealings,  i.  e.,  a  foreign  corporation,  is  governed  as  to  its 
powers,  rights  and  liabilities  by  its  charter  and  the  laws  of 
its  home  state,  subject  to  the  positive  limitations  of  the  outside 
state.  It  is  well  established  that  the  outside  state  may  impose 
such  restrictions  as  it  deems  wise  on  the  exercise  within  its 
borders  of  powers  by  foreign  corporations,  provided  its  regu- 
lations are  within  the  scope  of  its  legislative  body  and  not  un- 
constitutional, as  is,  e.  g.,  an  attempt  to  deny  the  right  to  sue 
in  the  federal  courts  or  any  attempted  regulation  of  interstate 
commerce. 

§  211.  In  holding  that  a  banking  corporation  of  Georgia 
could,  through  its  agent,  legally  discount  a  bill  of  exchange  in 
Alabama,  Taney,  C.  J.,  in  Bank  of  Augusta  v.  Earle,  13  Pet. 
517,  said  (p.  587)  : 

"The  nature  and  character  of  a  corporation  created  by  a 
statute  and  the  extent  of  the  powers  which  it  may  lawfully 
exercise  have  upon  several  occasions  been  under  consideration 
in  this  court.  In  the  case  of  Head  v.  Providence  Ins.  Co.,  2 
Cranch,  127,  Chief  Justice  Marshall,  in  delivering  the  opinion 
of  the  court,  said:  'Without  ascribing  to  this  body,  which  in 
its  corporate  capacity  is  the  mere  creature  of  the  act  to  which 
it  owes  its  existence,  all  the  qualities  and  disabilities  annexed 
by  the  common  law  to  ancient  institutions  of  this  sort,  it  may 
correctly  be  said  to  be  precisely  what  the  incorporating  act 
has  made  it;  to  derive  all  its  powers  from  that  act,  and  to 


173  FOREIGN   CORPORATIONS.  §  211 

be  capable  of  exerting  its  faculties  only  in  the  manner  which 
that  act  authorizes.  To  this  source  of  its  bein.s^,  then,  we 
must  recur  to  ascertain  its  powers ;  and  to  determine  whether 
it  can  complete  a  contract  by  such  communications  as  are  in 
this  record.'  In  the  case  of  Dartmouth  College  v.  Woodward, 
4  Wheat.  636,  the  same  principle  was  again  decided  by  the 
court.  'A  corporation,'  said  the  court,  'is  an  artificial  being, 
invisible,  intangible,  and  existing  only  in  contemplation  of 
law.  Being  a  mere  creature  of  the  law,  it  possesses  only  those 
properties  which  the  charter  of  its  creation  confers  upon  it, 
either  expressly  or  as  incidental  to  its  very  existence.'  And 
in  the  case  of  the  Bank  of  the  United  States  v.  Dandridge,  12 
Wheat.  64,  where  the  question  in  relation  to  the  powers  of 
corporations  and  their  mode  of  action  were  very  carefully  con- 
sidered, the  court  said:  'But  whatever  may  be  the  implied 
powers  of  aggregate  corporations  by  the  common  law  and  the 
modes  by  which  those  powers  are  to  be  carried  into  operation, 
corporations  created  by  statute  must  depend,  both  for  their 
powers  and  the  mode  of  exercising  them  upon  the  true  con- 
struction of  the  statute  itself.' 

"It  cannot  be  necessary  to  add  to  these  authorities.  And 
it  may  be  safely  assumed  that  a  corporation  can  make  no  con- 
tracts and  do  no  acts,  either  within  or  without  the  state  which 
creates  it,  except  such  as  are  authorized  by  its  charter;  and 
those  acts  must  also  be  done  by  such  officers  or  agents  and  in 
such  manner  as  the  charter  authorizes.  And  if  the  law  creat- 
ing a  corporation  does  not,  by  the  true  construction  of  the 
words  used  in  the  charter,  give  it  the  right  to  exercise  its 
powers  beyond  the  limits  of  the  state,  all  contracts  made  by 
it  in  other  states  would  be  void.  The  charter  of  the  Bank  of 
Augusta  authorizes  it  in  general  terms  to  deal  in  bills  of  ex- 
change, and,  consequently,  gives  it  the  power  to  purchase 
foreign  bills  as  well  as  inland ;  in  other  words,  to  purchase 
bills  payable  in  another  state.  The  power  thus  given  clothed 
the  corporation  witli  the  right  to  make  contracts  out  of  the 
state  in  so  far  as  Georgia  could  confer  it.  For  whenever  it 
purchased  a  foreign  bill  and  forwarded  it  to  an  agent  to  pre- 
sent for  acceptance,  if  it  was  honored  by  the  drawee,  the  con- 
tract of  acceptance  was  necessarily  made  in  another  state ; 
and  the  general  power  to  purchase  bills,  without  any  restric- 
tion as  to  place,  by  its  fair  and  natural  import,  authorized  the 
bank  to  make  such  purchases  wherever  it  was  found  most 
convenient  and  profitable  to  the  institution,  and  also  to  em- 
ploy suitable  agents  for  that  purpose.  The  purchase  of  the 
bill  in  question  was  therefore  the  exercise  of  one  of  the  powers 
which  the  bank  possessed  under  its  charter,  and  was  sanctioned 


§  212  SUMMARY    OF    CORPORATION   LAW.  17 J: 

by  the  law  of  Georgia  creating  the  corporation  so  far  as  that 
state  could  authorize  a  corporation  to  exercise  its  powers  be- 
yond the  limits  of  its  own  jurisdiction. 

!§  212.  "But  it  has  been  urged  in  the  argument  that  not- 
withstanding the  powers  thus  conferred  by  the  terms  of  the 
charter,  a  corporation,  from  the  very  nature  of  its  being,  can 
have  no  authority  to  contract  out  of  the  limits  of  the  state  ;  that 
the  laws  of  a  state  can  have  no  extraterritorial  operation,  and 
that  as  a  corporation  is  the  mere  creature  of  a  law  of  the  state, 
it  can  have  no  existence  beyond  the  limits  in  which  that  law 
operates,  and  that  it  must  necessarily  be  incapable  of  making 
a  contract  in  another  place.  It  is  very  true  that  a  corpora- 
tion can  have  no  legal  existence  out  of  the  boundaries  of  the 
sovereignty  by  which  it  is  created.  It  exists  only  in  contem- 
plation of  law  and  by  force  of  the  law;  and  where  that  law 
ceases  to  operate  and  is  no  longer  obligatory,  the  corporation 
can  have  no  existence.  It  must  dwell  in  the  place  of  its 
creation,  and  cannot  migrate  to  another  sovereignty.  But 
although  it  must  live  and  have  its  being  in  that  state  only,  yet 
it  does  not  by  any  means  follow  that  its  existence  there  will 
not  be  recognized  in  other  places;  and  its  residence  in  one 
state  creates  no  insuperable  objection  to  its  power  of  contract- 
ing in  another.  It  is  indeed  a  mere  artificial  being,  invisible 
and  intangible ;  yet  it  is  a  person  for  certain  purposes,  in  con- 
templation of  law,  and  has  been  recognized  as  such  by  the 
decisions  of  this  court.  It  was  so  held  in  the  case  of  the 
United  States  v.  Amedy,  11  Wheat.  412,  and  in  Beaston  v. 
Farmers'  Bank  of  Delaware,  12  Pet.  125.  Now,  natural  per- 
sons, through  the  intervention  of  agents,  are  continually  mak- 
ing contracts  in  countries  in  which  they  do  not  reside  and 
where  they  are  not  personally  present  when  the  contract  is 
made,  and  nobody  has  ever  doubted  the  validity  of  these  agree- 
ments. And  what  greater  objection  can  there  be  to  the  capa- 
city of  an  artificial  person  by  its  agents  to  make  a  contract 
within  the  scope  of  its  limited  powers  in  a  sovereignty  in  which 
it  does  not  reside,  provided  such  contracts  are  permitted  to  be 
made  by  them  by  the  laws  of  the  place  ? 

"The  corporation  must  no  doubt  show  that  the  law  of  its 
creation  gave  it  authority  to  make  such  contracts  through  such 
agents.  Yet,  as  in  the  case  of  a  natural  person,  it  is  not 
necessary  that  it  should  actually  exist  in  the  sovereignty  in 
which  the  contract  is  made.  It  is  sufficient  that  its  existence 
as  an  artificial  person  in  the  state  of  its  creation  is  acknowl- 
edged and  recognized  by  the  law  of  the  nation  where  the  deal- 


175  FOREIGN  CORPORATIONS.        §§  213,  214 

ing  takes  place ;  and  that  it  is  permitted  by  the  laws  of  that 
place  to  exercise  there  the  powers  with  which  it  is  endowed. 

|§  213.  "Every  power,  however,  of  the  description  of  which 
we  are  speaking,  which  a  corporation  exercises  in  another  state, 
depends  for  its  validity  upon  the  laws  of  the  sovereignty  in 
which  it  is  exercised ;  and  a  corporation  can  make  no  valid  con- 
tract without  their  sanction,  express  or  implied.  And  this 
brings  us  to  the  question  which  has  been  so  elaborate!}^  dis- 
cussed, whether  by  the  comity  of  nations,  and  between  these 
states,  the  corporations  of  one  state  are  permitted  to  make 
contracts  in  another.  It  is  needless  to  enumerate  here  the 
instances  in  which,  by  the  general  practice  of  civilized  coun- 
tries, the  laws  of  the  one  will,  by  the  comity  of  nations,  be 
recognized  and  executed  in  another,  where  the  rights  of  indi- 
viduals are  concerned.  The  cases  of  contracts  made  in  a 
foreign  country  are  familiar  examples ;  and  courts  of  justice 
have  always  expounded  and  executed  them  according  to  the 
laws  of  the  place  in  which  they  were  made ;  provided,  that  law 
was  not  repugnant  to  the  laws  or  policy  of  their  own  country. 
The  comity  thus  extended  to  other  nations  is  no  impeachment 
of  sovereignty.  It  is  the  voluntary  act  of  the  nation  by  which 
it  is  offered,  and  is  inadmissible  when  contrary  to  its  policy. 
or  prejudicial  to  its  interests.  But  it  contributes  so  largely 
to  promote  justice  between  individuals  and  to  produce  a 
friendly  intercourse  between  the  sovereignties  to  which  they 
belong,  that  courts  of  justice  have  continually  acted  upon  it, 
as  a  part  of  the  voluntary  law  of  nations.  It  is  truly  said  in 
Story's  Conflict  of  Laws,  37,  that  'In  the  silence  of  any  posi- 
tive rule  affirming  or  denying  or  restraining  the  operation  of 
foreign  laws,  courts  of  justice  presume  the  tacit  adoption  of 
them  by  their  own  government,  unless  they  are  repugnant  to 
its  policy  or  prejudicial  to  its  interests.  It  is  not  the  comity 
of  the  courts,  but  the  comity  of  the  nations,  which  is  admin- 
istered and  ascertained  in  the  same  way,  and  guided  by  the 
same  reasoning  by  which  all  other  principles  of  municipal 
law  are  ascertained  and  guided.' 

§  214.  "Adopting,  as  we  do,  the  principle  here  stated,  we 
proceed  to  inquire  whether,  by  the  comity  of  nations,  foreign 
corporations  are  permitted  to  make  contracts  within  their  jur- 
isdiction ;  and  we  can  perceive  no  sufficient  reason  for  exclud- 
ing them,  when  they  are  not  contrary  to  the  known  policy  of  the 
state  or  injurious  to  its  interests.  It  is  nothing  more  than  the 
admission  of  the  existence  of  an  artificial  person  created  by  the 
law  of  another  state  and  clothed  with  the  power  of  making 


§  215  SUMMARY   OF    CORPORATION   LAW.  176 

certain  cr^ntracts;  it  is  but  the  usual  comity  of  recognizing  the 
law  of  another  state.  In  England,  from  which  we  have  re- 
ceived our  general  principles  of  jurisprudence,  no  doubt  ap- 
pears to  have  been  entertained  of  the  right  of  a  foreign 
corporation  to  sue  in  its  courts,  since  the  case  of  Henriques  v. 
Dutch  West  India  Co.,  decided  in  1729.  2  Ld.  Raym.  1532. 
And  it  is  a  matter  of  history  which  this  court  are  bound  to 
notice  that  corporations  created  in  this  country  have  been  in 
the  open  practice  for  many  years  past  of  making  contracts  in 
England  of  various  kinds  and  to  very  large  amounts ;  and  we 
have  never  seen  a  doubt  suggested  there  of  the  validity  of 
these  contracts  by  any  court  or  any  jurist.  It  is  impossible 
to  imagine  that  any  court  in  the  United  States  would  refuse 
to  execute  a  contract  by  which  an  American  corporation  had 
borrowed  money  in  England;  yet  if  the  contracts  of  corpora- 
tions made  out  of  the  state  by  which  they  were  created  are 
void,  even  contracts  of  that  description  could  not  be  enforced. 

§  215.  "It  has,  however,  been  supposed  that  the  rules  of 
comity  between  foreign  nations  do  not  apply  to  the  states  of 
this  Union  ;  that  they  extend  to  one  another  no  other  rights  than 
those  which  are  given  by  the  constitution  of  the  United  States ; 
and  that  the  courts  of  the  general  government  are  not  at 
liberty  to  presume,  in  the  absence  of  all  legislation  on  the  sub- 
ject, that  a  state  has  adopted  the  comity  of  nations  toward 
the  other  states,  as  a  part  of  its  jurisprudence ;  or  that  it  ac- 
knowledges any  rights  but  those  which  are  secured  by  the  con- 
stitution of  the  United  States.  The  court  think  otherwise. 
The  intimate  union  of  these  states,  as  members  of  the  same 
great  political  family,  the  deep  and  vital  interests  which  bind 
them  so  closely  together,  should  lead  us,  in  the  absence_  of 
proof  to  the  contrary,  to  presume  a  greater  degree  of  comity, 
and  friendship  and  kindness  toward  one  another  than  we 
should  be  authorized  to  presume  between  foreign  nations. 
And  when  (as  without  doubt  must  occasionally  happen)  the 
interest  or  policy  of  any  state  requires  it  to  restrict  the  rule, 
it  has  but  to  declare  its  will  and  the  legal  presumption  is  at 
once  at  an  end.  But  until  this  is  done^  upon  what  grounds 
could  this  court  refuse  to  administer  the  law  of  international 
comity  between  these  states?  They  are  sovereign  states,  and 
the  history  of  the  past  and  the  events  which  are  daily  occur- 
ring furnish  the  strongest  evidence  that  they  have  adopted 
toward  each  other  the  laws  of  comity  in  their  fullest  extent. 
Money  is  frequently  borrowed  in  one  state  by  a  corporation 
created  in  another.  The  numerous  banks  established  by  dif- 
ferent states  are  in  the  constant  habit  of  contracting  and  deal- 


177  FOREIGN  CORPORATIONS.  §  216 

ing  with  one  another.  Agencies  for  corporations  engaged  in 
the  business  of  insurance  and  of  banking  have  been  established 
in  other  states  and  suffered  to  make  contracts,  without  any 
objection  on  the  part  of  the  state  authorities.  These  usages 
of  commerce  and  trade  have  been  so  general  and  public  and 
have  been  practiced  for  so  long  a  period  of  time,  and  so  gen- 
erally acquiesced  in  by  the  states,  that  the  court  cannot  over- 
look them  when  a  question  like  the  one  before  us  is  under 
consideration.  The  silence  of  the  state  authorities  while  these 
events  are  passing  before  them  show  their  assent  to  the  ordi- 
nary laws  of  comity  which  permit  a  corporation  to  make  con- 
tracts in  another  state.  But  we  are  not  left  to  infer  it  merely 
from  the  general  usages  of  trade  and  the  silent  acquiescence 
of  the  states.  It  appears  from  the  cases  cited  in  the  argument, 
which  it  is  unnecessary  to  recapitulate  in  this  opinion,  that 
it  has  been  decided  in  many  of  the  state  courts, — we  believe 
in  all  of  them  where  the  question  has  arisen, — that  a  corpora- 
tion of  one  state  may  sue  in  the  courts  of  another.  If  it  may 
sue,  why  may  it  not  make  a  contract?  The  right  to  sue  is 
one  of  the  powers  which  it  derives  from  its  charter.  If  the 
courts  of  another  country  take  notice  of  its  existence  as  a 
corporation,  so  far  as  to  allow  it  to  maintain  a  suit  and  per- 
mit it  to  exercise  that  power,  why  should  not  its  existence  be 
recognized  for  other  purposes  and  the  corporation  permitted 
to  exercise  another  power  which  is  given  to  it  by  the  same 
law  and  the  same  sovereignty — where  the  last-mentioned 
power  does  not  come  in  conflict  with  the  interest  or  policy  of 
the  state?  There  is  certainly  nothing  in  the  nature  and  char- 
acter of  a  corporation  which  could  justly  lead  to  such  a  dis- 
tinction, and  which  should  extend  to  it  the  comity  of  suit  and 
refuse  to  it  the  comity  of  contract.  If  it  is  allowed  to  sue, 
it  would  of  course  be  permitted  to  compromise,  if  it  thought 
proper,  with  its  debtor ;  to  give  him  time ;  to  accept  something 
else  in  satisfaction ;  to  give  him  a  release ;  and  to  employ  an  at- 
torney for  itself  to  conduct  its  suit.  These  are  all  matters  of 
contract,  and  yet  are  so  intimately  connected  with  the  right 
to  sue,  that  the  latter  could  not  be  effectually  exercised  if  the 
former  were  denied. 

§  216.  "We  turn,  in  the  next  place,  to  the  legislation  of  the 
states.  So  far  as  any  of  them  have  acted  on  this  subject,  it  is 
evident  that  they  have  regarded  the  comity  of  contract  as  well 
as  the  comity  of  suit  to  be  a  part  of  the  law  of  the  state  unless 
restricted  by  statute.  Thus  a  law  was  passed  by  the  state  of 
Pennsylvania  March  10,  1810,  which  prohibited  foreigners  and 
foreign  corporations  from  making  contracts  of  insurance 
12 


§  216  SUMMARY   OF    CORPORATION   LAW,  178 

against  fire  and  other  losses  mentioned  in  the  law.  In  New 
York,  also,  a  law  was  passed  March  18,  1814,  which  prohibited 
foreigners  and  f oreif?n  corporations  from  making  in  that  state 
insurances  against  fire;  and  by  another  law  passed  April  21. 
1818,  corporations  chartered  by  other  states  are  prohibited 
from  keeping  any  office  of  deposit  for  the  purpose  of  discount- 
ing promissory  notes  or  carrying  on  any  kind  of  business  which 
incorporated  banks  are  authorized  by  law  to  carry  on.  The 
prohibition  of  certain  specified  contracts  by  corporations  in 
these  laws  is  by  necessary  implication  an  admission  that  other 
contracts  may  be  made  by  foreign  corporations  in  Pennsyl- 
vania and  New  York;  and  that  no  legislative  permission  is 
necessary  to  give  them  validity.  And  the  language  of  these 
prohibitory  acts  most  clearly  indicates  that  the  contracts  for- 
bidden by  them  might  lawfully  have  been  made  before  these 
laws  were  passed.  IMaryland  has  gone  still  further  in  recog- 
nizing this  right.  By  a  law  passed  in  1834  that  state  has 
prescribed  the  manner  in  which  corporations  not  chartered  by 
the  state  'which  shall  transact  or  shall  have  transacted  busi- 
ness' in  the  state  may  be  sued  in  its  courts  upon  contracts 
made  in  the  state.  The  law  assumes  in  the  clearest  manner 
that  such  contracts  were  valid,  and  provides  a  remedy  by 
which  to  enforce  them. 

"In  the  legislation  of  Congress,  also,  where  the  states  and 
the  people  of  the  several  states  are  all  represented,  we  shall 
find  proof  of  the  general  understanding  in  the  United  States 
that  by  the  law  of  comity  among  the  states,  the  corporations 
chartered  by  one  were  permitted  to  make  contracts  in  the 
others.  By  the  act  of  Congress  of  June  23,  1836  (5  U.  S. 
Stats.  52),"^regulating  the  deposits  of  public  money,  the  Secre- 
tary of  the  Treasury  was  authorized  to  make  arrangements 
with  some  bank  or  banks  to  establish  an  agency  in  the  states 
and  territories  where  there  was  no  bank  or  none  that  could  be 
employed  as  a  public  depository  to  receive  and  disburse_  the 
public  money  which  might  be  directed  to  be  there  deposited. 
Now,  if  the  proposition  be  true  that  a  corporation  created  by 
one  state  cannot  make  a  valid  contract  in  another,  the  con- 
tracts made  through  this  agency  in  behalf  of  the  bank  out  of 
the  state  where  the  bank  itself  was  chartered  would  all  be 
void,  both  as  respected  the  contracts  with  the  government  and 
the  individuals  who  dealt  with  it.  How  could  such  an  agency, 
upon  the  principles  now  contended  for,  have  performed  any 
of  the  duties  for  which  it  was  established  1 

"But  it  cannot  be  necessary  to  pursue  the  argument  far- 
ther. We  think  it  is  well  settled  that  by  the  law  of  comity 
among  nations  a  corporation  created  by  one  sovereignty  is  per- 


179  FOREIGN   CORPORATIONS.,  §§217,218 

mitted  to  make  contracts  in  another  and  to  sue  in  its  courts, 
and  that  the  same  law  of  comity  prevails  amonir  the  several 
sovereignties  of  this  Union.  The  public  and  well-known  and 
long-continued  usages  of  trade;  the  general  acquiescence  of 
the  states ;  the  particular  legislation  of  some  of  them,  as  well 
as  the  legislation  of  Congress, — all  concur  in  proving  the  truth 
of  this  proposition. 

"But  we  have  already  said  that  this  comity  is  presumed  from 
the  silent  acquiescence  of  the  state.  Whenever  a  state  suffi- 
ciently indicates  that  contracts  which  derive  their  validity 
from  its  comity  are  repugnant  to  its  policy  or  are  considered 
as  injurious  to  its  interests,  the  presumption  in  favor  of  its 
adoption  can  no  longer  be  made." 

§  217.  In  holding  that  a  corporation  is  to  be  regarded  as  a 
citizen  of  the  state  of  its  creation  for  the  purpose  of  determin- 
ing the  question  of  diversity  of  citizenship,  Field,  J.,  in  Rail- 
way Co.  V.  Whitton,  13  Wall.  270,  said  (p.  283)  : 

"Although  a  corporation,  being  an  artificial  body  created 
by  legislative  power,  is  not  a  citizen  within  several  provi- 
sions of  the  Constitution,  yet  it  has  been  held,  and  that  must 
now  be  regarded  as  settled  law,  that  where  rights  of  action 
are  to  be  enforced,  it  will  be  considered  as  a  citizen  of  the 
state  where  it  was  created  within  the  clause  extending  the 
judicial  powers  of  the  United  States  to  controversies  between 
citizens  of  the  different  states," 

§  218.  In  holding  that  a  corporation  chartered  in  Virginia, 
whose  charter  was  re-enacted  in  Maryland  and  which  was  au- 
thorized by  Congress  to  extend  its  road  through  the  District 
of  Columbia,  was  one  corporation  amenable  to  the  courts  of 
the  District,  Swayne,  J,,  in  Railroad  Co.  v.  Harris,  12  Wall. 
65,  said  (p.  81)  : 

"A  corporation  is  in  law,  for  civil  purposes,  deemed  a 
person.  It  may  sue  and  be  sued,  grant  and  receive  and  da 
all  other  acts  not  ultra  vires  which  a  natural  person  could 
do.  The  chief  point  of  difference  between  the  natural  and 
the  artificial  person  is  that  the  former  may  do  whatever  is 
not  forbidden  by  law ;  the  latter  can  do  only  what  is  au- 
thorized by  its  charter.  It  cannot  migrate,  but  may  exer- 
cise its  authority  in  a  foreign  territory  upon  such  conditions 
as  may  be  prescribed  by  the  law  of  the  place.  One  of  these 
conditions  may  be  that  it  shall  consent  to  be  sued  there.  If 
it  do  business  there,  it  will  be  presumed  to  have  assented, 


§  219  SUIkfMARY   OF   CORPORATION   LAW.  180 

and  will  be  bound  accordingly.  For  the  purposes  of  federal 
jurisdiction  it  is  regarded  as  if  it  were  a  citizen  of  the  state 
where  it  was  created,  and  no  averment  or  proof  as  to  the 
citizenship  of  its  members  elsewhere  will  be  permitted. 
There  is  a  presumption  of  law  which  is  conclusive. 

"We  see  no  reason  why  several  states  cannot  by  competent 
legislation  unite  in  creating  the  same  corporation  or  in  com- 
bining several  pre-existing  corporations  into  a  single  one. 
....  Nor  do  we  see  any  reason  w^hy  one  state  may  not  make 
a  corporation  of  another  state,  as  there  organized  and  con- 
ducted, a  corporation  of  its  own  quo  ad  hoc  any  property 
within  its  territorial  jurisdiction.  That  this  may  be  done 
was  distinctly  held  in  the  Ohio  and  Mississippi  R.  R.  Co.  v. 
Wheeler,  1  Black,  297.  It  is  well  settled  that  corporations  of 
one  state  may  exercise  their  faculties  in  another  so  far  and  on 
such  terms  and  to  such  extent  as  may  be  permitted  by  the 
latter.  We  hold  that  the  case  before  us  is  within  this  latter 
category.  The  question  is  always  one  of  legislative  intent  and 
not  of  legislative  power  or  possibility." 

§  219.  In  holding  that  bondholders  in  a  Canadian  corpora- 
tion held  the  bonds  subject  to  a  certain  "Arrangement  Act"  of 
the  Canadian  parliament  modifying  the  bonds  in  certain 
ways,  Waite,  C.  J.,  in  Canada  Southern  R.  Co.  v.  Gebhard,  109 
U.  S.  527,  said  (p.  537)  : 

"A  corporation  'must  dwell  in  the  place  of  its  creation 
and  cannot  migrate  to  another  sovereignty'  (Bank  of  Au- 
gusta V.  Earle,  13  Pet.  588),  though  it  may  do  business  in  all 
places  where  its  charter  allows  and  the  local  laws  do  not 
forbid.  Railroad  v.  Koontz,  104  U.  S.  12.  But  wherever 
it  goes  for  business  it  carries  its  charter,  as  that  is  the  law 
of  its  existence  (Relf  v.  Rundel,  103  U.  S.  226),  and  the 
charter  is  the  same  abroad  that  it  is  at  home.  Whatever 
disabilities  are  placed  upon  the  corporation  at  home  it  re- 
tains abroad,  and  whatever  legislative  control  it  is  subjected 
to  at  home  must  be  recognized  and  submitted  to  by  those 
who  deal  with  it  elsewhere.  A  corporation  of  one  country 
may  be  excluded  from  business  in  another  country  (Paul 
V.  Virginia,  8  Wall.  168),  but  if  admitted  it  must,  in  the 
absence  of  legislation  equivalent  to  making  it  a  corporation 
of  the  latter  country,  be  taken  both  by  the  government  and 
those  who  deal  with  it  as  a  creature  of  the  law  of  its  own 
country,  and  subject  to  all  the  legislative  control  and  direc- 
tion that  may  be  properly  exercised  over  it  at  the  place  of  its 
creation.     Such  being  the  lav/,  it  follows  that  every  person 


181  FOREIGN  CORPORATIONS.  §  220 

who  deals  with  a  foreign  corporation  impliedly  subjects 
himself  to  such  laws  of  the  foreign  government  affecting  the 
powers  and  obligations  of  the  corporation  with  which  he 
voluntarily  contracts  as  the  known  and  established  policy 
of  that  government  authorizes.  To  all  intents  and  purposes, 
he  submits  his  contract  with  the  corporation  to  such  a 
policy  of  the  foreign  government,  and  Avhatever  is  done  by 
that  government  in  furtherance  of  that  policy  which  binds 
those  in  like  situation  with  himself  who  are  subjects  of  the 
government  in  respect  to  the  operation  and  effect  of  their 
contracts  with  the  corporation  will  necessarily  bind  him. 
He  is  conclusively  presumed  to  have  contracted  with  a  view 
to  such  laws  of  that  government,  because  the  corporation 
must  of  necessity  be  controlled  by  them,  and  it  has  no  power 
to  contract  with  a  view  to  any  .other  laws  with  which  they 
are  not  in  entire  harmony.  It  follows,  therefore,  that  any- 
thing done  at  the  legal  home  of  the  corporation  under  the 
authority  of  such  laws  which  discharges  it  from  liability 
there  discharges  it  everywhere." 

§  220.  In  holding  that  the  making  by  an  Ohio  corporation 
of  a  single  contract  in  Colorado  was  not  doing  business  in  the 
state,  subjecting  the  company  to  the  statutory  regulations  of 
Colorado,  "Woods,  J.,  in  Cooper  Mfg.  Co.  v.  Ferguson,  113 
U.  S.  727,  said  (p.  732)  : 

"The  right  of  the  people  of  a  state  to  prescribe  generally 
by  its  constitution  and  laws  the  terms  upon  which  a  foreign 
corporation  shall  be  allowed  to  carry  on  its  business  in  the 
state  has  been  settled  by  this  court.  Bank  of  Augusta  v. 
Earle,  13  Pet.  519;  Paul  v.  Virginia,  8  Wall.  168;  Ducat  v. 
Chicago,  10  Wall.  410.  The  plaintiff  in  error  does  not  deny 
this  right,  but  insists  that  upon  a  proper  construction  of 
section  10  of  article  15  of  the  Constitution  of  Colorado,  and 
of  section  23  of  the  act  of  1877,  its  contract  with  the  de- 
fendant was  valid,  and  that  its  suit  should  have  been  main- 
tained. 

*'As  the  clause  in  the  Constitution  and  the  act  of  the  legis- 
lature relate  to  the  same  subject  like  statutes  in  pari  materia, 
they  are  to  be  construed  together.  Eskridge  v.  State,  25 
Ala.  30.  The  act  was  passed  by  the  tirst  legislature  that  as- 
sembled after  the  adoption  of  the  Constitution  and  has  been 
allowed  to  remain  upon  the  statute  book  to  the  present  time. 
It  must  therefore  be  considered  as  a  contemporary  interpre- 
tation entitled  to  much  weight.     Stuart  v.  Laird,  1  Cranch, 


§  220  SUMMARY   OP   CORPORATION   LAW.  182 

299;  Martin  v.  Hunter,  1  Wheat.  304;  Cohens  v.  Virginia, 
6  Wheat.  264 ;  Adams  v.  Story,  1  Paine,  79,  90. 

"It  must  be  conceded  that  if  the  contract  on  which  the 
suit  was  brought  was  made  in  violation  of  a  law  of  the 
state,  it  cannot  be  enforced  in  any  court  sitting  in  the  state 
charii'ed  with  the  interpretation  and  enforcement  of  its  laws. 
Bank  of  the  United  States  v.  Owens,  2  Pet.  527;  Groves  v. 
Slaughter,  15  Pet.  448 ;  Harris  v.  Runnels,  12  How.  79  ;  Brown 
V.  Tarkington,  3  Wall.  377 ;  Davidson  v.  Lanier,  4  Wall.  447 ; 
Hanauer  v.  Doane,  12  Wall.  342;  Wheeler  v.  Russell,  17 
Mass.  258;  Law  v.  Hodson,  11  East,  300;  Little  v.  Poole,  9 
B.  &  C.  192 ;  Thorne  v.  Travelers'  Ins.  Co.,  80  Pa.  15 ;  Allen  v. 
Hawks,  13  Pick.  79,  82;  Roche  v.  Ladd,  1  Allen,  436,  441; 
In  re  Comstock,  3  Saw.  218.  So  far  as  appears  by  the  record, 
the  plaintiff  had  no  principal  place  of  business  nor  any  place 
of  business  whatever  in  the  state  of  Colorado,  and  the  mak- 
ing of  the  contract  set  out  in  the  complaint  was  the  only 
business  ever  done  by  it  or  that  it  ever  purposed  to  do  in  that 
state. 

"The  question  therefore  is,  whether  upon  a  true  construc- 
tion of  the  Constitution  and  statute  the  making  of  the  con- 
tract which  the  plaintiff  seeks  to  enforce  was,  under  the 
circumstances  stated,  forbidden. 

"The  contention  of  the  defendants  in  error  is  that  the 
prohibition  against  the  doing  of  any  business  in  the  state  by 
a  foreign  corporation  except  upon  the  prescribed  condition 
includes  the  doing  of  any  single  and  isolated  act  of  business 
whatever.  Thus  broadly  stated,  it  is  clear  that  the  inter- 
pretation of  the  defendants  cannot  be  sustained.  In  a  case 
involving  the  construction  of  the  statute,  the  supreme  court 
of  Colorado  held  that  a  foreign  corporation  might,  without 
complying  with  the  provisions  of  the  statute,  maintain  an 
action  in  the  courts  of  the  state  to  recover  damages  for 
trespass  to  its  real  estate.  The  court  said:  'The  prohibition 
extends  to  doing  business  before  the  compliance  with  the 
terms  of  the  statute.  We  do  not  think  this  an  abridgment 
of  the  right  of  a  foreign  corporation  to  sue.  It  extends  only 
to  the  exercise  of  the  powers  by  which  it  may  be  said  to  ordi- 
narily transact  or  carry  on  its  business.  To  what  extent 
the  exercise  of  these  pov.-ers  is  affected  we  do  not  decide.' 
Utley  V.  The  Clark  Gardner  Min.  Co.,  4  Colo.  369.  So  it 
is  clear  the  statute  cannot  be  construed  to  impose  upon  a 
foreign  corporation  limitations  of  its  right  to  make  con- 
tracts in  the  state  for  carrying  on  conunerce  between  the 
states,  for  that  would  make  the  act  an  invasion  of  the  exclu- 
sive right  of  Congress  to  regulate  commerce  among  the  sev- 


183  FOREIGN    CORPORATIONS.  §§221,222 

eral  states.  Paul  v.  Virginia,  8  Wall.  168.  The  prohibition 
against  doing  any  business  cannot,  therefore,  be  literally 
interpreted." 

§  221.  In  holding  that  a  provision  in  a  state  statute  requir- 
ing a  foreign  corporation  to  stipulate  that  it  would  not  remove 
suits  to  the  federal  courts  to  be  void,  Blatehford,  J.,  in  Barron 
V.  Bumside,  121  U.  S.  186,  said,  relative  to  the  right  of  the 
corporation  to  remove  suits  (p.  200)  : 

"Its  right  equally  with  any  individual  citizen  to  remove 
into  the  federal  court  under  the  laws  of  the  United  States 
such  suits  as  are  mentioned  in  the  third  section  of  the  Iowa 
statute  is  too  firmly  established  by  the  decisions  of  this  court 
to  be  questioned  at  this  day;  and  the  state  of  Iowa  might 
as  well  pass  a  statute  to  deprive  an  individual  citizen  of 
another  state  of  his  right  to  remove  such  suits. 

"As  the  Iowa  statute  makes  the  right  to  a  permit  de- 
pendent upon  the  surrender  by  the  foreign  corporation  of  a 
privilege  secured  to  it  by  the  constitution  and  laws  of  the 
United  States,  the  statute  requiring  the  permit  must  be  held 
to  be  void. 

"The  question  as  to  the  right  of  a  state  to  impose  upon 
a  corporation  engaged  in  interstate  commerce  the  duty  of 
obtaining  a  permit  from  the  state  as  a  condition  of  its  right 
to  carry  on  such  commerce  is  a  question  which  it  is  not  neces- 
sary to  decide  in  this  case.  In  all  the  cases  in  which  this 
court  has  considered  the  subject  of  the  granting  by  a  state 
to  a  foreign  corporation  of  its  consent  to  the  transaction  of 
business  in  the  state,  it  has  uniformly  asserted  that  no 
conditions  can  be  imposed  by  the  state  which  are  repugnant 
to  the  constitution  and  laws  of  the  United  States.  La  Fay- 
ette Ins.  Co.  V.  French,  18  How.  404,  407;  Ducat  v.  Chicago, 
10  Wall.  410,  415 ;  Insurance  Co.  v.  Morse,  20  Wall.  445,  456 ; 
St.  Clair  v.  Cox,  106  U.  S.  350,  356 ;  Phila.  Fire  Assn.  v.  New- 
York,  119  U.  S.  110,  120." 

ACTIONS  AND   SUITS  BY  AND  AGAINST  FOREIGN 
CORPORATIONS. 

§  222.  A  nonresident  may  sue  another  nonresident  in  the 
jurisdiction  where  the  defendant  is  personally  served  with  pro- 
cess. (Rice  V.  Brown,  81  Me.  56;  Johnston  v.  Trade  Ins.  Co., 
132  Mass.  432.) 


§  223  SUMMARY   OF    CORPORATION   LAW.  184 

Since  corporations  do  not  and  cannot  exist  in  fact  outside 
the  jurisdiction  of  the  laws  under  which  they  are  created  and 
exist,  foreign  corporations  or  those  not  created  by  the  state 
of  the  jurisdiction  invoked  are  necessarily  and  essentially 
nonresident.  (Nelins  v.  Edinburg  American  Land  Mortgage 
Co.,  92  Ala.  157.) 

Foreign  corporations,  therefore,  are,  like  nonresidents,  al- 
lowed to  sue  wherever  jurisdiction  of  the  defendant,  whether 
a  natural  or  artificial  person,  is  obtained.  (National  Teleph. 
Mfg.  Co.  V.  Du  Bois,  165  Mass.  117 ;  Bank  of  Augusta  v.  Earle, 
13  Pet.  519;  Pullman  Palace  Co.  v.  Lawrence,  74  Miss.  782; 
Lumbard  v.  Aldrich,  8  N.  II.  31 ;  Silver  Lake  Bank  v.  North, 
4  Johns.  Ch.  370;  Hibernia  Nat.  Bank  v.  Lacombe,  84  N.  Y. 
367.)  Since  a  person,  whether  natural  or  artificial,  cannot 
be  sued  unless  in  some  manner  served  with  process,  it  is  the 
established  rule  that  a  foreign  corporation  cannot  be  sued 
unless  it  has  subjected  itself  to  the  jurisdiction  in  question, 
and  that  process  cannot  be  served  upon  it,  without  its  con- 
sent, express  or  ionplied,  outside  the  jurisdiction  of  its  crea- 
tion. (Barnett  v.  Chicago  &  L.  H.  R.  Co.,  4  Hun,  114;  Pull- 
man Palace  Car  Co.  v.  Harrison,  122  Ala.  149 ;  Aldrich  v. 
Anchor  etc.  Co.,  24  Or.  32;  Lathrop  v.  Union  P.  P.  Co.,  7 
D.  C.  m.) 

A  corporation  may,  however,  voluntarily  submit  itself  to  be 
served  with  process  in  jurisdictions  foreign  to  its  creation, 
and  where  a  state  prescribes  conditions  with  which  foreign 
corporations  must  comply  in  order  to  do  business  in  the  state, 
a  corporation  doing  business  in  the  state  is  held  thereby  to 
have  tacitly  submitted  itself  to  the  service  of  process  and 
to  the  jurisdiction  of  the  courts  of  the  state. 

§  223.  In  St.  Clair  v.  Cox,  106  U.  S.  350,  in  holding  that  in 
an  action  in  the  federal  court  a  judgment  obtained  in  the  state 
courts  against  a  foreign  corporation  was  not  admissible  in 
evidence,  for  the  reason  that  the  state  court  did  not  obtain 
jurisdiction  of  the  corporation,  since  though  its  agent  was 
served  within  the  state  it  did  not  appear  that  the  corporation 
was  doing  business  in  the  state,  and  therefore  had  not  sub- 


185  FOREIGN  CORPORATIONS.  §  229 

mitted  itself  to  the  jurisdiction  of  the  state  courts,  Field,  J"., 
said  (p.  354)  : 

"Formerly,  it  was  held  that  a  foreign  corporation  could 
not  be  sued  in  an  action  for  the  recovery  of  a  personal 
demand  outside  of  the  state  by  which  it  was  chartered.  The 
principle  that  a  corporation  must  dwell  in  the  place  of  its 
creation,  and  cannot,  as  said  by  Mr.  Chief  Justice  Taney, 
migrate  to  another  sovereignty,  coupled  with  the  doctrine  that 
an  officer  of  the  corporation  does  not  carry  his  functions  with 
him  when  he  leaves  his  state,  prevented  the  maintenance  of 
personal  actions  against  it.  There  was  no  mode  of  compelling 
its  appearance  in  the  foreign  jurisdiction.  Legal  proceedings 
there  against  it  were,  therefore,  necessarily  confined  to  the 
disposition  of  such  property  belonging  to  it  as  could  be  there 
found ;  and  to  authorize  them  legislation  was  necessary. 

"In  McQueen  v.  Middleton  Manufacturing  Co.,  decided  in 
1819,  the  supreme  court  of  New  York,  in  considering  the  ques- 
tion whether  the  law  of  that  state  authorized  an  attachment 
against  the  property  of  a  foreign  corporation,  expressed  the 
opinion  that  a  foreign  corporation  could  not  be  sued  in  the 
state,  and  gave  as  a  reason  that  the  process  must  be  served 
on  the  head  or  principal  officer  within  the  jurisdiction  of  the 
sovereignty  where  the  artificial  body  existed ;  observing  that 
if  the  president  of  a  bank  went  to  New  York  from  another 
state,  he  would  not  represent  the  corporation  there;  and  that 
'his  functions  and  his  character  would  not  accompany  him 
when  he  moved  beyond  the  jurisdiction  of  the  government  un- 
der whose  laws  he  derived  this  character.'  16  Johns.  (N.  Y.) 
5.  The  opinion  thus  expressed  was  not,  perhaps,  necessary  to 
the  decision  of  the  case,  but  nevertheless  it  has  been  accepted 
as  correctly  stating  the  law.  It  was  cited  with  approval  by 
the  supreme  court  of  Massachusetts,  in  1834,  in  Peckham  v. 
North  Parish  in  Haverhill,  the  court  adding  that  all  foreign 
corporations  were  without  the  jurisdiction  of  the  process  of 
the  courts  of  the  commonwealth.  16  Pick.  (Mass.)  274.  Sim- 
ilar expressions  of  opinion  are  found  in  numerous  decisions, 
accompanied  sometimes  with  suggestions  that  the  doctrine 
might  be  otherwise  if  the  foreign  corporation  sent  its  officer 
to  reside  in  the  state  and  transact  business  there  on  its  ac- 
count. Libbey  v.  Plodgdon,  9  N.  H.  394;  Moulin  v.  Trenton 
Insurance  Co.,  24  N.  J.  L.  222. 

§  229.  "This  doctrine  of  the  exemption  of  a  corporation 
from  suit  in  a  state  other  than  that  of  its  creation  was  the  cause 
of  much  inconvenience  and  often  of  manifest  injustice.     The 


§  230  SUMMARY    OF    CORPORATION   LAW.  186 

great  increase  in  tlie  number  of  corporations  of  late  years, 
and  the  immense  extent  of  their  business,  only  made  this 
inconvenience  and  injustice  more  frequent  and  marked.  Cor- 
porations now  enter  into  all  the  industries  of  the  country. 
The  business  of  banking,  mining,  manufacturing,  transporta- 
tion and  insurance  is  almost  entirely  carried  on  by  them,  and 
a  large  portion  of  the  wealth  of  the  country  is  in  their  hands. 
Incorporated  under  the  laws  of  one  state,  they  carry  on  the 
most  extensive  operations  in  other  states.  To  meet  and  obvi- 
ate this  inconvenience  and  injustice,  the  legislatures  of  several 
states  interposed,  and  provided  for  service  of  process  on 
officers  and  agents  of  foreign  corporations  doing  business 
therein.  Whilst  the  theoretical  and  legal  view,  that  the  domi- 
cile of  a  corporation  is  only  in  the  state  where  it  is  created, 
was  admitted,  it  was  perceived  that  when  a  foreign  corpora- 
tion sent  its  officers  and  agents  into  other  states  and  opened 
offices,  and  carried  on  its  business  there,  it  was,  in  effect,  as 
much  represented  by  them  there  as  in  the  state  of  its  creation. 
As  it  was  protected  by  the  laws  of  those  states,  allowed  to 
carry  on  its  business  within  their  borders,  and  to  sue  in  their 
courts,  it  seemed  only  right  that  it  should  be  held  responsible 
in  those  courts  for  obligations  and  liabilities  there  incurred. 

"All  that  there  is  in  the  legal  residence  of  a  corporation  in 
the  state  of  its  creation  consists  in  the  fact  that  by  its  laws 
the  corporators  are  associated  together  and  allowed  to  exer- 
cise as  a  body  certain  functions,  with  a  right  of  succession 
in  its  members.  Its  officers  and  agents  constitute  all  that  is 
visible  of  its  existence ;  and  they  may  be  authorized  to  act 
for  it  without  as  well  as  within  the  state.  There  v/ould  seem, 
therefore,  to  be  no  sound  reason  why,  to  the  extent  of  their 
agency,  they,  should  not  be  equally  deemed  to  represent  it 
in  the  states  for  which  they  are  respectively  appointed  when 
it  is  called  to  legal  responsibility  for  their  transactions. 

"The  case  is  unlike  that  of  suits  against  individuals.  They 
can  act  by  themselves,  and  upon  them  process  can  be  di- 
rectly served,  but  a  corporation  can  only  act  and  be  reached 
through  agents.  Serving  process  on  its  agents  in  other  states, 
for  matters  within  the  sphere  of  their  agency,  is,  in  effect, 
serving  process  on  it  as  much  so  as  if  such  agents  resided  in 
the  state  where  it  was  created. 

§  230.  "A  corporation  of  one  state  cannot  do  business  in 
another  state  without  the  latter 's  consent,  express  or  implied, 
and  that  consent  may  be  accompanied  with  such  conditions  as 
it  may  think  proper  to  impose.  As  said  by  this  court  in  Lafay- 
ette Insurance  Co.  v.  French, '  These  conditions  must  be  deemed 


187  FOREIGN  CORPORATIONS.  §  230 

valid  and  effeetual  by  other  states  and  by  this  court,  pro- 
vided they  are  not  repugnant  to  the  constitution  or  laws  of 
the  United  States,  or  inconsistent  with  those  rules  of  public 
law  which  secure  the  jurisdiction  and  authority  of  each  state 
from  encroachment  by  all  others,  or  that  principle  of  natural 
justice  which  forbids  condemnation  without  opportunity  for 
defense. '     18  How.  404 ;  Paul  v.  Virginia,  8  Wall.  168. 

"The  state  may,  therefore,  impose  as  a  condition  upon 
w^hich  a  foreign  corporation  shall  be  permitted  to  do  business 
within  her  limits,  that  it  shall  stipulate  that  in  any  litigation 
arising  out  of  its  transactions  in  the  state,  it  will  accept  as 
sufficient  the  service  of  process  on  its  agents  or  persons 
specially  designated;  and  the  condition  would  be  eminently 
fit  and  just.  And  such  condition  and  stipulation  may  be 
implied  as  well  as  expressed.  If  a  state  permits  a  foreign 
corporation  to  do  business  within  her  limits,  and  at  the  same 
time  provides  that  in  suits  against  it  for  business  there  done, 
process  shall  be  served  upon  its  agents,  the  provision  is  to 
be  deemed  a  condition  of  the  permission ;  and  corporations 
that  subsequently  do  business  in  the  state  are  to  be  deemed 
to  assent  to  such  condition  as  fully  as  though  they  had 
specially  authorized  their  agents  to  receive  service  of  the 
process.  Such  condition  must  not,  however,  encroach  upon 
that  principle  of  natural  justice  which  requires  notice. of  a 
suit  to  a  party  before  he  can  be  bound  by  it.  It  must  be 
reasonable,  and  the  service  provided  for  should  be  only  upon 
such  agents  as  may  be  properly  deemed  representatives  of 
the  foreign  corporation.  The  decision  of  this  court  in  Lafay- 
ette Ins.  Co.  V.  French,  to  which  we  have  already  referred, 
sustains  these  views. 

"The  state  of  Michigan  permits  foreign  corporations  to 
transact  business  within  her  limits.  Either  by  express  enact- 
ment, as  in  the  case  of  insurance  companies,  or  by  her  acqui- 
escence, they  are  as  free  to  engage  in  all  legitimate  business 
as  corporations  of  her  own  creation.  Her  statutes  expressly 
provide  for  suits  being  brought  by  them  in  her  courts ;  and 
for  suits  by  attachment  being  brought  against  them  in  favor 
of  residents  of  the  state.  And  in  these  attachment  suits  they 
authorize  the  service  of  a  copy  of  the  writ  of  attachment, 
with  a  copy  of  the  inventory  of  the  property  attached,  on 
'any  officer,  member,  clerk  or  agent  of  such  corporation' 
within  the  state,  and  give  to  a  personal  service  of  a  copy  of 
the  writ  and  of  the  inventory  on  one  of  these  persons  the 
force  and  effect  of  personal  service  of  a  summons  on  a  de- 
fendant in  suits  commenced  by  summons. 


§  231  SUMMARY   OF    CORPORATION   LAW.  188 

§  231.  "It  thus  seems  that  a  writ  of  foreign  attachment  in 
that  state  is  made  to  serve  a  double  purpose — as  a  command  to 
the  officer  to  attach  property  of  the  corporation,  and  as  a 
summons  to  the  latter  to  appear  in  the  suit.  We  do  not,  how- 
ever, understand  the  laws  as  authorizing  the  service  of  a 
copy  of  the  writ,  as  a  summons,  upon  an  agent  of  a  foreign 
corporation,  unless  the  corporation  be  engaged  in  business  in 
the  state,  and  the  agent  be  appointed  to  act  there.  We  so 
construe  the  words  'agent  of  such  corporation  within  this 
state.'  They  do  not  sanction  service  upon  an  officer  or  agent 
of  the  corporation  who  resides  in  another  state  and  is  only 
casually  in  the  state,  and  not  charged  with  any  business  of 
the  corporation  there.  The  decision  in  Newell  v.  Great  West- 
em.  Railway  Co.,  reported  in  the  19th  of  Michigan  reports, 
supports  this  view,  although  that  was  the  case  of  an  attempted 
service  of  a  declaration  as  the  commencement  of  the  suit. 
The  defendant  was  a  Canadian  corporation,  owning  and 
operating  a  railroad  from  Suspension  Bridge  in  Canada  to 
the  Detroit  line  at  Windsor,  opposite  Detroit,  and  carrying 
passengers  in  connection  with  the  Michigan  Central  Railroad 
Company,  upon  tickets  sold  by  such  companies  respectively. 
The  suit  was  commenced  in  Michigan,  the  declaration  alleging 
a  contract  by  the  defendant  to  carry  the  plaintiff  over  its 
road,  and  its  violation  of  the  contract  by  removing  him  from 
its  cars  at  an  intermediate  station.  The  declaration  was 
served  upon  Joseph  Price,  the  treasurer  of  the  corporation, 
who  was  only  casually  in  the  state.  The  corporation  appeared 
specially  to  object  to  the  jurisdiction  of  the  court,  and  pleaded 
that  it  was  a  foreign  corporation  and  had  no  place  of  busi- 
ness or  agent  or  officer  iu  the  state,  or  attorney  to  receive 
service  of  legal  process,  or  to  appear  for  it;  and  that  Joseph 
Price  was  not  in  the  state  at  the  time  of  service  on  him  on 
any  official  business  of  the  corporation.  The  plaintiff  having 
demurred  to  this  plea,  the  court  held  the  service  insufficient. 
'The  corporate  entity,'  said  the  court,  'could  by  no  possi- 
bility enter  the  state,  and  it  could  do  nothing  more  in  that 
direction  than  to  cause  itself  to  be  represented  here  by  its  offi- 
cers or  agents.  Such  representation  would,  however,  neces- 
sarily imply  something  more  than  the  mere  presence  here  of 
a  person  possessing,  when  in  Canada,  the  relation  to  the  com- 
pany of  an  officer  or  agent.  To  involve  the  representation 
of  the  company  here,  the  supposed  representative  would  have 
to  hold  or  enjoy  in  this  state  an  actual  present  official  or  rep- 
resentative status.  He  would  be  required  to  be  here  as  an 
agent  or  officer  of  the  corporation,  and  not  as  an  isolated  in- 
dividual.    If  he  should  drop   the   official  or   representative 


189  FOREIGN  CORPORATIONS.  §  232 

character  at  the  frontier,  if  he  should  bring  that  character 
no  further  than  the  territorial  boundary  of  the  government 
to  whose  laws  the  corporate  body  itself,  and  consequently  the 
official  positions  of  its  officers  also,  would  be  constantly  in- 
debted for  existence,  it  could  not,  with  propriety,  be  main- 
tained that  he  continued  to  possess  such  character  by  force 
of  our  statute.  Admitting,  therefore,  for  the  purpose  of  this 
suit,  that  in  given  cases  the  foreign  corporation  would  be 
bound  by  service  on  its  treasurer  in  Michigan,  this  could  only 
be  so  when  the  treasurer,  the  then  official,  the  officer  then  in 
a  manner  impersonating  the  company,  should  be  served. 
Joseph  Price  was  not  here  as  the  treasurer  of  the  defend- 
ants. He  did  not  then  represent  them.  His  act  in  coming  was 
not  the  act  of  the  company,  nor  was  his  remaining  the  busi- 
ness or  act  of  any  besides  himself.  He  had  no  principal,  and 
he  was  not  an  agent.  He  had  no  official  status  or  representa- 
tive character  in  this  state.'     p.  344. 

"According  to  the  view  thus  expressed  by  the  supreme 
court  of  Michigan,  service  upon  an  agent  of  a  foreign  corpo- 
ration will  not  be  deemed  sufficient,  unless  he  represents  the 
corporation  in  the  state.  This  representation  implies  that 
the  corporation  does  business,  or  has  business,  in  the  state  for 
the  transaction  of  which  it  sends  or  appoints  an  agent  there. 
If  the  agent  occupies  no  representative  character  with  respect 
to  the  business  of  the  corporation  in  the  state,  a  judgment 
rendered  upon  service  on  him  would  hardly  be  considered  in 
other  tribunals  as  possessing  any  probative  force.  In  a  case 
where  similar  service  was  made  in  New  York  upon  an  officer 
of  a  corporation  of  New  Jersey  accidentally  in  the  former 
state,  the  supreme  court  of  New  Jersey  said  that  a  law  of 
another  state  which  sanctioned  such  service  upon  an  officer 
accidentally  within  its  jurisdiction  was  'so  contrary  to  natural 
justice  and  to  the  principles  of  international  law,  that  the 
courts  of  other  states  ought  not  to  sanction  it.'  Moulin  v. 
Trenton  Insurance  Co.,  24  N.  J.  L.  222,  234." 

§  232.  In  Barrow  Steamship  Co.  v.  Kane,  170  U.  S.  100,  it 
was  held  that  a  resident  of  New  Jersey  could  maintain  in  the 
United  States  circuit  court  for  the  southern  district  of  New 
York  an  action,  for  a  tort  committed  in  Ireland,  against  the 
defendant,  a  foreign  corporation  doing  business  in  New  York 
through  duly  accredited  agents,  but  not  having  designated 
an  agent  under  the  statute.  Gray,  Justice,  saying  (p.  105)  : 

"It  was  contended  in  behalf  of  the  steamship  company  that 
being  a  foreign   corporation,  no  suit  could  be  maintained 


§§233,234  SUMMARY   OF    CORPORATION   LAW.  190 

against  it  in  personam  in  this  country  without  its  consent, 
express  or  implied;  that  by  doing  business  in  the  state  of  New 
York  it  consented  to  be  sued  only  as  authorized  by  the  stat- 
utes of  the  state ;  that  the  jurisdiction  of  the  courts  of  the 
United  States  held  within  the  state  depended  on  the  authority 
given  by  those  statutes;  that  the  statutes  of  New  York  con- 
ferred no  authority  upon  any  court  to  issue  process  against 
a  foreign  corporation  in  an  action  by  a  nonresident,  and  for 
a  cause  not  arising  within  the  state ;  and  therefore  that  the 
circuit  court  acquired  no  jurisdiction  of  this  action  brought 
against  a  British  corporation  by  a  citizen  and  resident  of  New 
Jersey 

§  233.  "The  manifest  injustice  which  would  ensue  if  a 
foreign  corporation,  permitted  by  a  state  to  do  business  therein 
and  to  bring  suits  in  its  courts,  could  not  be  sued  in  those  courts, 
and  thus,  while  allowed  the  benefits,  be  exempt  from  the  bur- 
dens of  the  laws  of  the  state,  has  induced  many  states  to  pro- 
vide by  statute  that  a  foreign  corporation  making  contracts 
within  the  state  shall  appoint  an  agent  residing  therein,  upon 
whom  process  may  be  served  in  actions  upon  such  contracts. 
This  court  has  often  held  that  wherever  such  a  statute  exists, 
service  upon  an  agent  so  appointed  is  sufficient  to  support 
jurisdiction  of  an  action  against  the  foreign  corporation, 
either  in  the  courts  of  the  state  or,  when  consistent  with  the 
acts  of  Congress,  in  the  courts  of  the  United  States  held 
within  the  state ;  but  it  has  never  held  the  existence  of  such 
a  statute  to  be  essential  to  the  jurisdiction  of  the  circuit  courts 
of  the  United  States.  Lafayette  Ins.  Co.  v.  French,  18  How. 
404;  Ex  parte  Schollenberger,  96  U.  S.  369;  New  England 
Ins.  Co.  V.  Woodworth,  111  U.  S.  138,  146 ;  Shaw  v.  Quincy 
Mining  Co.,  145  U.  S.  444,  452 The  liability  of  a  for- 
eign corporation  to  be  sued  in  a  particular  jurisdiction  need 
not  be  distinctly  expressed  in  the  statutes  of  that  jurisdiction, 
but  may  be  implied  from  a  grant  of  authority  in  those  stat- 
utes to  carry  on  its  business  there In  England,  the 

right  of  a  foreign  corporation  doing  business  in  England  to 
sue  in  the  English  courts  was  long  ago  recognized;  and  its 
liability  to  be  subjected  to  suit  in  those  courts  by  service  made 
upon  one  of  its  principal  officers  residing  and  representing  it 
within  the  realm  has  been  fully  established  by  recent  deci- 
sions. Newby  v.  Van  Oppen,  L.  R.  7  Q.  B.  293;  Haggin  v. 
Comptoir  d'Escompte  de  Paris,  23  Q.  B.  D.  519. 

§  234.  "In  the  courts  of  several  states  of  the  Union  the  like 
view  has  prevailed.     Libbey  v.  Hodgdon,  9  N.  H.  394;  March  v. 


191  FOREIGN  CORPORATIONS.  §  234 

Eastern  Railroad  Co.,  40  N.  H.  548,  579 ;  Day  v.  Essex  County 
Bank,  13  Vermont,  97 ;  Moulin  v.  Trenton  InvS.  Co.,  1  Dutchcr 
(25  N.  J.  L.),  57;  Bushel  v.  Commonwealth  Ins.  Co.,  15  S.  & 
R.  173 ;  North  Missouri  Railroad  v.  Akers,  4  Kansas,  453,  469 ; 
Council  Bluffs  Co.  v.  Omaha  Co.,  49  Nebraska,  537.  The 
courts  of  New  York  and  Massachusetts,  indeed,  have  declined 
to  take  jurisdiction  of  suits  against  foreign  corporations,  ex- 
cept so  far  as  it  has  been  expressly  conferred  by  statutes  of 
the  state.  McQueen  v.  Middleton  Manuf.  Co.,  16  Johns.  5; 
Robinson  v.  Oceanic  Steam  Navigation  Co.,  112  N.  Y.  315; 
Desper  v.  Continental  Water  Meter  Co.,  137  Mass.  252.  But 
the  jurisdiction  of  the  circuit  courts  of  the  United  States  is 
not  created  by,  and  does  not  depend  upon,  the  statutes  of  the 
several  states.  In  the  circuit  courts  of  the  United  States 
there  have  been  conflicting  opinions,  but  the  most  satisfactory 
ones  are  those  of  Judge  Drummond  and  Judge  Lowell  in  favor 
of  the  liability  of  foreign  corporations  to  be  sued.  Wilson 
Packing  Co.  v.  Hunter,  8  Bissell,  429  ;  Hayden  v.  Androscoggin 
Mills,  1  Fed.  Rep.  93 On  the  other  hand,  upon  the  funda- 
mental principle  that  no  one  shall  be  condemned  unheard,  it 
is  well  settled  that  in  a  suit  against  a  corporation  of  one  state 
brought  in  a  court  of  the  United  States  held  within  another 
state,  in  which  the  corporation  neither  docs  business  nor  has 
authorized  any  person  to  represent  it,  service  upon  one  of  its 
officers  or  employees  found  within  the  state  will  not  support 
the  jurisdiction,  notwithstanding  that  such  service  is  recog- 
nized as  sufficient  by  the  statutes  or  the  judicial  decisions  of 
the  state.  St.  Clair  v.  Cox,  106  U.  S.  350 ;  Fitzgerald  Co.  v. 
Fitzgerald,  137  U.  S.  98,  106 ;  Goldey  v.  Morning  News,  156 
U.  S.  518.     See,  also,  Mexican  Central  Railway  v.  Pinkney, 

149  U.  S.  194 The  present  action  was  brought  by  a 

citizen  and  resident  of  the  state  of  New  Jersey,  in  a  circuit 
court  of  the  United  States  held  within  the  state  of  New  York, 
against  a  foreign  corporation  doing  business  in  the  latter 
state.  It  was  for  a  personal  tort  committed  abroad,  such  as 
would  have  been  actionable  if  committed  in  the  state  of  New 
York  or  elsewhere  in  this  country,  and  an  action  for  which 
might  be  maintained  in  any  circuit  court  of  the  United  States 
which  acquired  jurisdiction  of  the  defendant.  Railroad  Co. 
V.  Harris,  above  cited  (12  Wall.  65)  ;  Dennick  v.  Railroad 
Co.,  103  U.  S.  11 ;  Huntington  v.  Attrill,  146  U.  S.  657,  670, 
675;  Stewart  v.  Baltimore  &  Ohio  Railroad,  168  U.  S.  445. 
The  summons  was  duly  served  upon  the  regularly  appointed 
agents  of  the  corporation  in  New  York.  In  re  Hohorst  above 
cited.  The  action  was  within  the  general  jurisdiction  con- 
ferred by  Congress  upon  the  circuit  courts  of  the  United 


§  235  SUMMARY   OF    CORPORATION   LAW.  192 

States.  The  fact  that  the  legislature  of  the  state  of  New 
York  has  not  seen  fit  to  authorize  like  suits  to  be  brought  in 
its  own  courts  by  citizens  and  residents  of  other  states  cannot 
deprive  such  citizens  of  their  right  to  invoke  the  jurisdiction 
of  the  national  courts  under  the  constitution  and  laws  of  the 
United  States." 

Similarly,  H.  N.  Reeves  v.  Southern  Ry.  Co.,  121  Va.  561; 
Sullivan  v.  Sullivan  Timber  Co.,  103  Ala.  371;  Aldrich  v. 
Anchor  Coal  &  Development  Co.,  24  Or.  32;  Granite  State 
Provident  Assn.  v.  Lloyd,  145  111.  620;  Harding  v.  American 
Glucose  Co.,  182  111.  551 ;  State  v.  U.  S.  Mut.  Ace.  Assn.,  67 
Wis.  624;  Ins.  Co.  v.  Gillett,  54  Md.  212. 

§  235.  The  question  then  arises.  What  constitutes  "doing 
business"? 

This  is  a  question  of  fact,  dependent  partly  on  acts  and 
partly  on  intention,  as  is  the  similar  ciuestion  of  domicile. 
As  was  said  by  the  circuit  court  of  appeals  for  the  sixth  cir- 
cuit, in  Oakland  Sugar  Mill  Co.  v.  Wolfe  Co.,  118  Fed.  239, 
it  is  properly  one  for  determination  by  a  jury.  The  test  to 
be  gathered  from  the  authorities  is  whether  a  single  act  or 
more  has  been  performed  by  the  corporation  through  its 
agent  or  agents  within  the  state  of  the  kind  characteristic 
of  the  business  objects  of  the  corporation  and  with  apparent 
intent  to  continue  such  performance. 

In  Neyens  v.  Worthington,  150  Mich.  580,  114  N.  W.  404,  it 
was  held  that  a  contract  made  in  Michigan  by  an  Illinois  cor- 
poration appointing  an  agent  for  the  continued  sale  of  its 
products  for  the  period  of  fifteen  years  was  doing  business 
within  the  state,  McAlvay,  C.  J.,  saying: 

"There  is  a  conflict  in  the  authorities  as  to  what,  under 
these  regulating  statutes,  constitutes  'carrying  on  its  business' 
in  a  state  by  an  unauthorized  foreign  corporation.  The 
weight  of  authority  holds  that  a  single  sale  of  goods,  or  a 
single  business  transaction  by  such  corporation,  cannot  be  held 
to  amount  to  carrying  on  business  where  there  is  no  purpose 
to  do  any  further  business.  19  Cyc.  Law  &  Proc,  p.  1268, 
and  cases  cited.  The  case  at  bar  is  distinguishable  from 
either  of  the  classes  of  cases  above  mentioned.  This  agree- 
ment by  its  terms  was  an  invasion  of  this  state  by  a  foreign 
corporation,  not  simply  to  make  sales  of  products  manufac- 


193  FOREIGN  CORPORATIONS.  §  236 

tured  and  delivered  in  a  foreign  state,  nor  was  it  a  single  act 
of  business  without  intent  or  purpose  to  do  any  other  busi- 
ness; but  it  was  for  the  express  purpose  of  extending  and 
establishing  its  business  permanently  within  the  state.  The 
agreement  was  made  within  the  state,  with  a  citizen  of  the 
state,  to  be  executed  by  him  wholly  within  its  territory.  It 
covered  a  term  of  fifteen  years,  and  for  the  rights  granted 
under  it  a  large  consideration  was  received  by  the  company. 
This  transaction  will,  in  our  opinion,  bear  no  other  construc- 
tion than  that  this  corporation  was  carrying  on  its  business 
within  this  state  with  the  express  intention  of  continuing  so 
to  do.  None  of  the  authorities  question  the  proposition  that, 
if  the  acts  of  a  foreign  corporation,  in  coming  within  a  state, 
amount  to  carrying  on  business,  such  corporation  must  con- 
form with  the  requirements  of  the  statute,  or  be  subjected  to 
its  penalties  and  restrictions.  The  cases  cited  by  plaintiff  as 
sustaining  his  contention  that  this  was  not  'carrying  on  busi- 
ness' recognize  the  doctrine  that,  where  an  act  of  business  is 
transacted  by  a  foreign  corporation  within  a  state  with  the 
intention  to  continue  to  transact  its  business  in  such  state, 
the  corporation  is  carrying  on  its  business  within  such  state. 
Cooper  Mfg.  Co.  v.  Ferguson,  113  U.  S.  735,  28  L.  Ed.  1139, 
5  Sup.  Ct.  Rep.  739;  Commercial  Bank  v.  Sherman,  28  Or. 
576,  52  Am.  St.  Rep.  811,  43  Pac.  658;  Florsheim  Bros.  Dry 
Goods  Co.  V.  Lester,  60  Ark.  120,  27  L.  R.  A.  505,  46  Am.  St. 
Rep.  162,  29  S.  W.  34.  See,  also.  People  v.  Horn  Silver  Min. 
Co.,  105  N.  Y.  76, 11  N.  E.  155.  In  Vaughn  Mach.  Co.  v.  Light- 
house, 64  App.  Div.  142,  71  N.  Y.  Supp.  801,  the  court  said : 
'The  crucial  test  in  doing  business  within  the  meaning  of  this 
statute  is  not  an  isolated  transaction  within  the  state,  or  the 
transshipment  of  goods  from  the  home  office  pursuant  to 
orders  taken  by  drummers  within  the  state,  but  it  is  the  es- 
tablishment of  an  agency  or  branch  office  within  our  state 
limits.'  " 

§  236.  In  Diamond  Glue  Co.  v.  United  States  Glue  Co., 
187  U.  S.  611,  it  was  held  that  where  an  Illinois  corporation 
contracted  in  Wisconsin  with  a  Wisconsin  corporation  to  ereci 
a  factory  for  the  latter  in  Wisconsin,  and  proceeded  to  act  un- 
der the  contract,  it  was  doing  business  in  Wisconsin.  Holmes, 
J.,  said : 

"According  to  the  undisputed  testimony  of  the  plaintiff's 
vice-president,  who  executed  the  contract,  the  instrument  was 
signed  in  Wisconsin,  and  at  all  events,  if  it  was  executed  ■with 
13 


§  237  SUMMARY    OF    CORPORATION   LAW.  194 

a  view  to  the  carrying  on  of  business  in  that  state  by  the 
plaintiff,  the  law  of  Wisconsin  must  be  applied.  London 
Assurance  v.  Companhia  de  Moagens  do  Barreiro,  167  U.  S. 
149,  160,  161;  Graves  v.  Johnson,  156  Massachusetts,  211." 

In  People  ex  rel.  Southern  Cotton  Oil  Co.  v.  Wemple,  131 
N.  Y.  64,  it  was  held  that  a  New  Jersey  corporation  which  had 
a  sales  agency  in  New  York,  and  for  a  period  of  three  years 
sold  about  one-third  of  its  product  in  New  York,  was  doing 
business  in  New  York. 

Similarly,  United  States  Rubber  Co.  v.  Butler  &  Shoe  Co., 
132  Fed.  398;  Farmers'  Loan  &  Trust  Co.  v.  Lake  etc.  R.  Co., 
173  111.  439 ;  John  Deere  Plow  Co.  v.  Wyland,  69  Kan.  255. 
So  likewise  is  the  investment  of  capital  and  management  of 
property  in  the  state  doing  business  therein.  People  v.  Miller, 
181  N.  Y.  328;  People's  Building  etc.  Assn.  v.  Markley,  27 
Ind.  App.  128,  60  N.  E.  1013;  Groel  v.  United  Electric  Co., 
69  N.  J.  Eq.  397. 

§  237.  The  doing  of  a  single  act  or  making  a  single  con- 
tract may,  under  the  particular  statute  or  the  circumstances  of 
the  particular  case,  be  doing  business  in  the  state  (State  v. 
Bristol  Savings  Bank,  108  Ala.  3,  18  South.  533 ;  Pennsylvania 
Co.  v.  Bauerle,  143  111.  459,  33  N.  E.  166 ;  Lamb  v.  Lamb,  14 
Fed.  Cas.  8018 ;  International  Text-book  Co.  v.  Lynch,  81  Vt. 
101,  69  Atl.  541)  ;  or  it  may  not  be  doing  business,  as  the  case 
may  be.  (Sigel  Campion  Livestock  etc.  Co.  v.  Haston,  68  Kan, 
749,  75  Pac.  1028 ;  Florsheim  Bros.  Dry  Goods  Co.  v.  Lester, 
60  Ark.  120,  29  S.  W.  34;  Colorado  Iron  Works  v.  Sierra 
Grande  Min.  Co.,  15  Colo.  499,  25  Pac.  325 ;  Delaware  &  Canal 
Co.  V.  Mahlenbrock,  63  N.  J.  L.  281,  43  Atl.  978;  Commercial 
Bank  v.  Sherman,  28  Or.  573,  43  Pac.  658;  Keene  Guaranty 
Sav.  Bank  v.  Lawrence,  32  Wash.  572,  73  Pac.  680 ;  Chicago 
Title  €tc.  Co.  V.  Bashf ord,  120  AVis.  281,  97  N.  W.  940 ;  Ware 
Cattle  Co.  V.  Anderson,  107  Iowa,  231,  77  N.  W.  1026 ;  Empire 
Milling  etc.  Co.  v.  Tombstone  etc.  Min.  Co.,  100  Fed.  910 ;  Kil- 
gore  v?  Smith,  122  Pa.  48,  15  Atl.  698;  Meddis  v.  Kenney,  176 
Mo.  200,  75  S.  W.  633 ;  Holder  v.  Aultman  &  Co.,  169  U.  S.  81 ; 
Bamberger  v.  Schoolfield,  160  U.  S.  149 ;  McNaughton  Co.  v. 
McGirl,  20  Mont.  124,  49  Pac.  651.)     On  the  other  hand,  in- 


195  FOREIGN  CORPORATIONS.  §  237 

terstate  commerce  transactions,  be  they  single  or  continuous, 
amounting  in  substance  to  the  sale  of  goods  by  corporations 
outside  the  state  for  shipment  into  and  delivery  within  the 
state,  are  not  doing  business  in  the  state.  (Morgan  v.  White, 
101  Ind.  413;  Boardman  v.  McClure  Co.,  123  Fed.  614;  Ware 
V.  Hamilton  Brown  Shoe  Co.,  92  Ala.  145,  9  South.  136 ;  John 
Spry  Lumber  Co.  v.  Chappell,  184  111.  539,  56  N.  E.  794;  Wil- 
cox Cordage  etc.  Co.  v.  Mosher,  114  Mich.  64,  72  N.  W.  117 ; 
North  Wisconsin  Cattle  Co.  v.  Oregon  etc.  R.  Co.,  105  Minn. 
198,  117  N.  W.  391 ;  Wolff  Dryer  Co.  v.  Bigler,  192  Pa.  466,  43 
Atl.  1092 ;  Rich  v.  Chicago  etc.  R.  Co.,  34  Wash.  14,  74  Pac. 
1008 ;  Green  v.  Chicago  etc.  R.  Co.,  205  U.  S.  530j  Grace  Co. 
V.  Henry  Martin  etc.  Co.,  174  Fed.  131.) 


EMINENT  DOMAIN. 


CHAPTER  XIL 

PUBLIC  USE. 

§  250.  Every  sovereign  state  has  in  the  last  analysis  the  ab- 
solute dominion  and  disposal  of  its  citizens  and  their  property. 
It  is  the  source  alike  of  all  legal  rights  and  of  all  legal  duties 
and  obligations.  Subject  only  to  self-imposed  limitations,  it 
may  create  and  destroy  rights  and  impose  or  relax  and  annul 
duties  and  obligations. 

With  us,  ultimate  sovereignty  is  in  the  people,  delegated  to 
the  federal  and  state  governments,  subject  to  certain  limita- 
tions, and  among  the  sovereign  functions  recognized  as  per- 
taining to  our  federal  and  state  governments  is  the  right  or 
power  of  eminent  domain.  These  words,  "eminent  domain," 
are  used  to  denote  the  sovereign  power  to  appropriate  prop- 
erty to  such  purposes  and  objects  as  may  be  determined  by 
government  to  require  its  use. 

This  right  and  power  in  the  government  termed  "eminent 
domain"  is  subjected  to  the  constitutional  limitations  (1)  that 
no  person  shall  be  deprived  of  his  life,  liberty  or  property 
without  due  process  of  law;  (2)  that  private  property  shall 
not  be  taken  for  public  use  without  just  compensation. 

These  limitations  contained  in  the  federal  constitution  are 
controlling  to  the  extent  that  no  state  constitution  can  lessen 
their  force,  whatever  more  stringent  limitation  may  be  added. 

It  is  generally  agreed  that  the  institution  of  private  prop- 
erty being  recognized  by  the  constitution,  by  virtue,  therefore, 
of  this  recognition,  and  of  the  express  constitutional  limita- 
tions above  mentioned,  private  property  may  not  be  taken 
for  private  use,  irrespective  of  any  question  of  compensation, 
i.  e.,  that  private  property  may  not,  by  legislative  or  other 
sovereign    fiat,   be   taken    from   one   private   individual   and 

(197) 


§§251,252  EMINENT  Domain.  198 

vested  in  another  private  individual  for  the  private  use  of 
that  or  any  person  or  persons. 

§  251.  The  scope,  therefore,  of  the  exercise  of  the  right  and 
power  of  eminent  domain  resolves  itself  into  the  question, 
What  is  a  taking  of  private  property  by  due  process  of  law  for 
public  use  upon  just  compensation  made  1 

Various  rules  have  been  tentatively  established  by  the  state 
courts,  but  little  more  is  attempted  here  than  to  illustrate  the 
standard  set  by  the  supreme  court  of  the  United  States,  to 
which  all  must  conform. 

First  to  be  determined  is  the  question.  What  is  a  public 
use?  Upon  this  question  is  perhaps  the  widest  variance  of 
authority,  some  confining  the  application  of  the  term  to  the 
more  determinate  and  less  elastic  class  of  cases  similar  to  the 
ancient  trinoda  necessitas,  i.  e.,  to  cases  where  the  public,  as 
such,  may  continually  participate  in  the  use,  e,  g.,  a  bridge, 
a  railroad,  or  other  similar  public  utility,  while  other  author- 
ities apply  a  different  test,  namely,  whether  the  intended  use 
be  one  requisite  to  enhance  the  public  welfare.  This  latter 
test  is  much  less  easy  of  determination  and  application,  but, 
by  reason  of  its  very  elasticity,  is  better  conformable  to  the 
changing  conditions  of  a  growing,  expanding  and  progressive 
people. 

This  latter  has  been  approved  by  the  supreme  court  of  the 
United  States  as  the  standard  to  be  applied,  and  in  a  com- 
paratively recent  case  it  was  held  to  be  a  question  essentially 
in  the  last  resort  for  judicial  determination,  and  whether, 
upon  all  the  facts  and  circumstances  surrounding  the  particu- 
lar case,  the  use  for  which  the  property  is  proposed  to  be 
taken  is  shown  to  be  a  public  use. 

§  252.  In  Cole  v.  La  Grange,  113  U.  S.  1,  in  holding  that  a 
state  legislature  could  not  authorize  a  city  to  issue  bonds  by 
way  of  donation  to  a  private  manufacturing  company,  Gray, 
J.,  said : 

"The  general  grant  of  legislative  power  in  the  constitu- 
tion of  a  state  does  not  enable  the  legislature,  in  the  exercise 
either  of  the  right  of  eminent  domain  or  of  the  right  of  taxa- 


199  PUBLIC  USE.  §  253 

tion,  to  take  private  property,  without  the  owner's  consent, 
for  any  but  a  public  object.  Nor  can  the  legislature  author- 
ize counties,  cities  or  towns  to  contract,  for  private  objects, 
debts  which  must  be  paid  by  taxes.  It  cannot,  therefore,  au- 
thorize them  to  issue  bonds  to  assist  merchants  or  manufac- 
turers, whether  natural  persons  or  corporations,  in  their  pri- 
vate business.  These  limits  of  the  legislative  power  are  now 
too  firmly  established  by  judicial  decisions  to  require  extended 
argument  upon  the  subject." 

§  253.  In  West  River  Bridge  Co.  v.  Dix,  6  How.  507,  it  was 
held  that  a  charter  of  a  corporation  is  subject  to  the  right  of 
eminent  domain  in  the  state,  and  that  a  bridge  held  by  an  in- 
corporated company  under  a  charter  from  a  state  may  be  con- 
demned and  taken  as  part  of  a  public  road  under  the  laws  of 
the  state,  without  impairing  the  obligation  of  the  contract  of 
the  charter.     Daniel,  J.,  in  the  opinion  of  the  court,  said: 

"No  state,  it  is  declared,  shall  pass  a  law  impairing  the 
obligation  of  contracts;  yet  with  this  concession  constantly 
yielded,  it  cannot  be  justly  disputed  that  in  every  political 
sovereign  community  there  inheres  necessarily  the  right  and 
the  duty  of  guarding  its  own  existence,  and  of  protecting  and 
promoting  the  interests  and  welfare  of  the  community  at 
large.  This  power  and  this  duty  are  to  be  exerted  not  only 
in  the  highest  acts  of  sovereignty  and  in  the  external  rela- 
tions of  governments;  they  reach  and  comprehend  likewise 
the  interior  polity  and  relations  of  social  life,  which  should 
be  regulated  with  reference  to  the  advantage  of  the  whole 
society.  This  power  denominated  the  eminent  domain  of  the 
state  is,  as  its  name  imports,  paramount  to  all  private  rights 
vested  under  the  government,  and  these  last  are,  by  necessary 
implication,  held  in  subordination  to  this  power,  and  must 
yield  in  every  instance  to  its  proper  exercise. 

"The  constitution  of  the  United -States,  although  adopted 
by  the  sovereign  states  of  this  Union  and  proclaimed  in  its 
own  language  to  be  the  supreme  law  for  their  government, 
can,  by  no  rational  interpretation,  be  brought  to  conflict  with 
this  attribute  in  the  states.  There  is  no  express  delegation 
of  it  by  the  constitution,  and  it  would  imply  an  incredible 
fatuity  in  the  states  to  ascribe  to  them  the  intention  to  relin- 
quish the  power  of  self-government  and  self-preservation.  A 
correct  view  of  this  matter  must  demonstrate,  moreover,  that 
the  right  of  eminent  domain  in  government  in  no  wise  inter- 
feres with  the  inviolability  of  contracts;  that  the  most  sancti- 


§  254  EMINENT   DOMAIN.  200 

monious  regard  for  the  one  is  perfectly  consistent  with  the 
possession  and  exercise  of  the  other. 

§  254.  "Under  every  established  government,  the  tenure  of 
property  is  derived,  mediately  or  immediately,  from  the  sover- 
eign power  of  the  political  body,  organized  in  such  mode  or  ex- 
erted in  such  way  as  the  community  or  state  may  have  thought 
proper  to  ordain.  It  can  rest  on  no  other  foundation,  can 
have  no  other  guaranty.  It  is  owing  to  these  characteristics 
only,  in  the  original  nature  of  tenure,  that  appeals  can  be 
made  to  the  laws  either  for  the  protection  or  assertion  of  the 
rights  of  property.  Upon  any  other  hypothesis,  the  law  of 
property  would  be  simply  the  law  of  force.  Now,  it  is  un- 
deniable that  the  investment  of  property  in  the  citizen  by  the 
government,  whether  made  for  a  pecuniary  consideration  or 
founded  on  conditions  of  civil  or  political  duty,  is  a  contract 
between  the  state,  or  the  government  acting  as  its  agent,  and 
the  grantee ;  and  both  the  parties  thereto  are  bound  in  good 
faith  to  fulfill  it.  But  into  all  contracts,  whether  made  be- 
tween states  and  individuals  or  between  individuals  only, 
there  enter  conditions  which  arise  not  out  of  the  literal  terms 
of  the  contract  itself ;  they  are  superinduced  by  the  pre-ex- 
isting and  higher  authority  of  the  laws  of  nature,  of  nations, 
or  of  the  community  to  which  the  parties  belong;  they  are 
always  presumed,  and  must  be  presumed,  to  be  known  and 
recognized  by  all,  are  binding  upon  all,  and  need  never,  there- 
fore, be  carried  into  express  stipulation,  for  this  could  add 
nothing  to  their  force.  Every  contract  is  made  in  subordina- 
tion to  them,  and  must  yield  to  their  control,  as  conditions, 
inherent  and  paramount,  wherever  a  necessity  for  their  exe- 
cution shall  occur.  Such  a  condition  is  the  right  of  eminent 
domain.  This  right  does  not  operate  to  impair  the  contract 
effected  by  it,  but  recognizes  its  obligation  in  the  fullest  ex- 
tent, claiming  only  the  fulfillment  of  an  essential  and  insepa- 
rable condition.  Thus,  in  claiming  the  resumption  or  qualifi- 
cation of  an  investiture,  it  insists  merely  on  the  true  nature 
and  character  of  the  right  invested.  The  impairing  of  con- 
tracts inhibited  by  the  constitution  can  scarcely,  by  the 
greatest  violence  of  construction,  be  made  applicable  to  the 
enforcing  of  the  terms  or  necessary  import  of  a  contract ;  the 
language  and  meaning  of  the  inhibition  were  designed  to  em- 
brace proceedings  attempting  the  interpolation  of  some  new 
term  or  condition  foreign  to  the  original  agreement,  and 
therefore  inconsistent  with  and  violative  thereof.  It,  then, 
being  clear  that  the  power  in  question  not  being  within  the 
purview  of  the  restriction  imposed  by  the  tenth  section  of 


201  PUBLIC  USE.  §  254 

the  first  article  of  the  constitution,  it  remains  with  the  states, 
to  the  full  extent  in  which  it  inheres  in  every  sovereicrn  gov- 
ernment, to  he  exercised  by  them  in  that  degree  that  shall  by 
them  be  deemed  commensurate  with  public  necessity.  So 
long  as  they  shall  steer  clear  of  the  single  predicament  de- 
nounced by  the  constitution,  shall  avoid  interference  with  the 
obligation  of  contracts,  the  wisdom,  the  modes,  the  policy,  the 
hardship  of  any  exertion  of  this  power  are  subjects  not  witliin 
the  proper  cognizance  of  this  court.  This  is  in  truth  purely 
a  question  of  power;  and  conceding  the  power  to  reside  in  the 
state  government,  this  concession  would  seem  to  close  the  door 
upon  all  further  controversy  in  connection  with  it.  The  in- 
stances of  the  exertion  of  this  power,  in  some  mode  or  other, 
from  the  very  foundation  of  civil  government,  have  been  so 
numerous  and  familiar,  that  it  seems  somewhat  strange  at 
this  day  to  raise  a  doubt  or  question  concerning  it.  In  fact, 
the  whole  policy  of  the  country  relative  to  roads,  mills,  bridges 
and  canals  rests  upon  this  single  power,  under  which  lands 
have  been  always  condemned,  and  without  the  exertion  of  this 
power,  not  one  of  the  improvements  just  mentioned  could  be 
constructed.  In  our  country  it  is  believed  that  the  power 
was  never,  or,  at  any  rate,  rarely,  questioned,  until  the  opinion 
seems  to  have  obtained  that  the  right  of  property  in  a  char- 
tered corporation  was  more  sacred  and  intangible  than  the 
same  right  could  possibly  be  in  the  person  of  the  citizen ;  an 
opinion  which  must  be  without  any  grounds  to  rest  upon  until 
it  can  be  demonstrated  either  that  the  ideal  creature  is  more 
than  a  person,  or  the  corporeal  being  is  less.  For  as  a  ques- 
tion of  the  power  to  appropriate  to  public  uses  the  property 
of  private  persons,  resting  upon  the  ordinary  foundations  of 
private  right,  there  would  seem  to  be  room  neither  for  doubt 
nor  difficulty.  A  distinction  has  been  attempted  in  argument 
between  the  power  of  a  government  to  appropriate  for  public 
uses  property  which  is  corporeal  or  may  be  said  to  be  in  being 
and  the  like  power  in  the  government  to  resume  or  extinguish 
a  franchise.  The  distinction  thus  attempted  we  regard  as  a 
refinement  which  has  no  foundation  in  reason,  and  one  that 
in  truth  avoids  the  true  legal  or  constitutional  question  in 
these  causes,  namely,  that  of  the  right  in  private  persons,  in 
the  use  or  enjoyment  of  their  private  property,  to  control  and 
actually  to  prohibit  the  power  and  duty  of  the  government 
to  advance  and  protect  the  general  good.  We  are  aware  of 
nothing  peculiar  to  a  franchise  which  can  class  it  higher  or 
render  it  more  sacred  than  other  property.  A  franchise  is 
property,  and  nothing  more ;  it  is  incorporeal  property,  and 
is  so  defined  by  Justice  Blackstone  when  treating  in  his  second 


§  255  EMINENT   DOMAIN.  202 

volume,  cliapter  3,  pae;e  20,  of  the  Rights  of  Things.  It  is 
its  character  of  property  only  which  imparts  to  it  value  and 
alone  authorizes  in  individuals  a  right  of  action  for  invasions 
or  disturbances  of  its  enjoyment.  Vide,  Bl.  Cora.,  vol.  Ill, 
eh.  16,  p.  236,  as  to  injuries  to  this  description  of  private 
property  and  the  remedies  given  for  redressing  them.  A 
franchise,  therefore,  to  erect  a  bridge  or  construct  a  road  to 
keep  a  ferry  and  to  collect  tolls  upon  them,  granted  by  the 
authority  of  the  state,  we  regard  as  occupying  the  same  posi- 
tion, with  respect  to  the  paramount  power  and  duty  of  the 
state  to  promote  and  protect  the  public  good,  as  does  the  right 
of  the  citizen  to  the  possession  and  enjoyment  of  his  land 
under  his  patent  or  contract  with  the  state,  and  it  can  no  more 
interpose  any  obstruction  in  the  way  of  their  just  exertion. 
Such  exertion  we  hold  to  be  not  within  the  inhibition  of  the 
constitution,  and  no  violation  of  a  contract.  The  power  of  a 
state,  in  the  exercise  of  eminent  domain,  to  extinguish  imme- 
diately a  franchise  it  had  granted  appears  never  to  have  been 
directly  brought  here  for  adjudication,  and  consequently  has 
not  been  heretofore  formally  propounded  from  this  court;  but 
in  England,  this  power,  to  the  fullest  extent,  was  recognized 
in  the  case  of  the  Governor  and  Company  of  the  Cast  Plate 
Manufacturers  v.  Meredith,  4  T.  R.  794,  and  Lord  Kenyon, 
especially  in  that  case,  founded  solely  upon  this  power  the 
entire  policy  and  authority  of  all  the  road  and  canal  laws  of 
the  kingdom. " 

§  255.     And  Woodbury,  J.,  said: 

"I  take  the  liberty  to  say,  then,  as  to  the  cardinal  principle 
involved  in  this  case,  that  in  my  opinion  all  the  property  in 
a  state  is  derived  from,  or  protected  by,  its  government,  and 
hence  is  held  subject  to  its  wants  in  taxation,  and  to  certain 
important  public  uses,  both  in  war  and  peace.  Vattel,  B.  1, 
ch.  20.  §  244 ;  2  Kent  Com.  270 ;  37  Am.  Jur.  121 ;  1  Bl.  Com. 
139;  3  Wils.  303;  3  Story  Const.  661;  3  Dall.  95.  Some 
ground  this  public  right  on  sovereignty.  2  Kent  Com.  339 ; 
Grotius,  B.  1,  ch.  1,  §  6.  Some  on  necessity.  2  Johns.  (N. 
Y.)  Ch.  162;  11  Wend.  (N.  Y.)  51;  14  id.  56;  1  Rice  (S.  C), 
383;  Vanhorne's  Lessee  v.  Dorrance,  2  Dall.  310;  Dyer  v. 
Tuscaloosa  Bridge,  2  Port.  (Ala.)  303;  Harding  v.  Goodlett, 
3  Yerg.  (Tenn.)  53.  Some  on  implied  compact.  Raleigh 
&  Gaston  Railroad  Co.  v.  Davis,  2  Dev.  &  B.  (N.  C.)  456;  2 
Bay  36,  in    S.  Car.;  3  Yerg.  (Tenn.)  53. 

"When  a  charter  is  granted  after  laws  exist  to  condemn 
property  when  needed  for  public  purposes,  others  might  well 
rest  such  a  right  on  the  hypothesis  that  such  laws  are  virtually 


203  PUBLIC  USB.  §256 

a  part  and  condition  of  the  grant  itself,  as  much  as  if  in- 
scribed in  it  totidem  verbis.  Towne  v.  Smith,  1  Woodb.  &  M. 
134;  2  How.  608,  617;  1  id.  311;  3  Story  Const.,  §§  1377,  1378, 
quaere. 

"But  however  derived,  this  eminent  domain  exists  in  all 
governments,  and  is  distinguished  from  the  public  domain,  as 
that  consists  of  public  lands,  buildings,  etc.,  owned  in  trust 
exclusively  and  entirely  by  the  government  (3  Kent.  Com. 
339;  Memphis  v.  Overton,  3  Yerg.  (Tenn.)  389)  ;  while  this 
consists  only  in  the  right  to  use  the  property  of  others,  when 
needed  for  certain  public  purposes.  Without  now  going  fur- 
ther into  the  reasons  or  extent  of  it,  and  under  whatever 
name  it  is  most  appropriately  described,  I  concur  in  the  views 
of  the  court,  that  it  still  remains  in  each  state  of  the  Union 
in  a  case  like  the  present,  having  never  been  granted  to  the 
general  government  so  far  as  respects  the  public  highways  of 
a  state,  and  that  it  extends  to  taking  for  public  use  for  a  road 
any  property  in  the  state  suitable  and  necessary  for  it. 
Tuckahoe  Canal  Case,  11  Leigh  (Va.),  75;  11  Pet.  560;  20 
Johns.  (N.  Y.)  724 J  3  Paige  (N.  Y.),  45;  7  Pick.  (Mass.) 
459." 

§  256.  In  Kohl  et  al.  v.  United  States,  91  U.  S.  367,  in  hold- 
ing that  the  right  of  eminent  domain  existed  in  the  United 
States  government  to  condemn  a  parcel  of  land  in  Cincinnati 
for  a  postoffice,  and  that  the  circuit  court  of  the  United  States 
had  jurisdiction  of  the  condemnation  proceeding,  Strong,  J., 
said: 

"No  one  doubts  the  existence  in  the  state  governments  of 
the  right  of  eminent  domain — a  right  distinct  from  and  para- 
mount to  the  right  of  ultimate  ownership.  It  grows  out  of 
the  necessities  of  their  being,  not  out  of  the  tenure  by  which 
lands  are  held.  It  may  be  exercised,  though  the  lands  are 
not  held  by  grant  from  the  government,  either  mediately  or 
immediately,  and  independent  of  the  consideration  whether 
they  would  escheat  to  the  government  in  case  of  a  failure  of 
heirs.  The  right  is  the  offspring  of  political  necessity ;  and 
it  is  inseparable  from  sovereignty,  unless  denied  to  it  by  its 
fundamental  law.  Vattel,  c.  20,  34;  Bynk.,  lib.  2,  c.  15; 
Kent's  Com.  338,  340;  Cooley  on  Const.  Lim.  584  et  seq.  But 
it  is  no  more  necessar}^  for  the  exercise  of  the  powers  of  a 
state  government  than  it  is  for  the  exercise  of  the  conceded 
powers  of  the  federal  government.  That  government  is  as 
sovereign  within  its  sphere  as  the  states  are  within  theirs. 
True,  its  sjphere  is  limited.     Certain  subjects  only  are  com- 


§  257  EMINENT   DOMAIN.  204 

mitted  to  it ;  but  its  power  over  those  subjects  is  as  full  and 
complete  as  is  the  power  of  the  states  over  the  subjects  to 
which  their  sovereignty  extends.  The  power  is  not  changed 
by  its  transfer  to  another  holder. 

"But  if  the  right  of  eminent  domain  exists  in  the  federal 
government,  it  is  a  right  which  may  be  exercised  within  the 
states,  so  far  as  is  necessary  to  the  enjoyment  of  the  powers 
conferred  upon  it  by  the  constitution.  In  Ableman  v.  Booth, 
21  How.  523,  Chief  Justice  Taney  described  in  plain  lan- 
guage the  complex  nature  of  our  government,  and  the  exist- 
ence of  two  distinct  and  separate  sovereignties,  within  the 
same  territorial  space,  each  of  them  restricted  in  its  powers, 
and  each  within  its  sphere  of  action  prescribed  by  the  con- 
stitution of  the  United  States  independent  of  the  other. 
Neither  is  under  the  necessity  of  applying  to  the  other  for 
permission  to  exercise  its  lawful  powers.  Within  its  own 
sphere  it  may  employ  all  the  agencies  for  exerting  them  which 
are  appropriate  or  necessar.y,  and  which  are  not  forbidden  by 
the  law  of  its  being.  "When  the  power  to  establish  postoffices 
and  to  create  courts  within  the  states  was  conferred  upon 
the  federal  government,  included  in  it  was  authority  to  obtain 
sites  for  such  offices  and  for  courthouses,  and  to  obtain  them 
by  such  means  as  were  known  and  appropriate.  The  right 
of  eminent  domain  was  one  of  those  means  well  known  when 
the  constitution  was  adopted,  and  employed  to  obtain  lands 
for  public  uses.  Its  existence,  therefore,  in  the  grantee  of 
that  power  ought  not  to  be  questioned.  The  constitution 
itself  contains  an  implied  recognition  of  it  beyond  what  may 
justly  be  implied  from  the  express  grants.  The  fifth  amend- 
ment contains  a  provision  that  private  property  shall  not 
be  taken  for  public  use  without  just  compensation." 

§  257.  And  respecting  the  jurisdiction  of  the  circuit 
courts : 

"When,  in  the  eleventh  section  of  the  Judiciary  Act  of 
1789,  jurisdiction  of  suits  of  a  civil  nature  at  common  law  or 
in  equity  was  given  to  the  circuit  courts,  it  was  intended  to 
embrace  not  merely  suits  which  the  common  law  recognized 
as  among  its  old  and  settled  proceedings,  but  suits  in  which 
legal  rights  were  to  be  ascertained  and  determined  as  distin- 
guished from  rights  in  equity,  as  well  as  suits  in  admiralty. 
The  right  of  eminent  domain  always  was  a  right  at  common 
law.  It  was  not  a  right  in  equity,  nor  was  it  even  the  creature 
of  a  statute.  The  time  of  its  exercise  may  have  been  pre- 
scribed by  statute ;  but  the  right  itself  was  superior  to  any 
statute.     That  it  was  not  enforced  through  the  agency  of  a 


205  PUBLIC  USE.  §§258,259 

jury  is  immaterial ;  for  many  civil  as  well  as  criminal  pro- 
ceedings at  common  law  were  without  a  jury.  It  is  difficult, 
then,  to  see  why  a  proceeding  to  take  land  in  virtue  of  the 
government's  eminent  domain,  and  determining  the  compen- 
sation to  be  made  for  it,  is  not  within  the  meaning  of  the 
statute  a  suit  at  common  law  when  initiated  in  a  court.  It 
is  an  attempt  to  enforce  a  legal  right.  It  is  quite  immaterial 
that  Congress  has  not  enacted  that  the  compensation  shall  be 
ascertained  in  a  judicial  proceeding.  That  ascertainment  is 
in  its  nature,  at  least,  quasi  judicial." 

§  258.  In  Kaukauna  Water  Power  Co.  v.  Green  Bay  etc. 
Canal,  142  U.  S.  254,  it  was  held  that  while  the  erection  of  a 
dam  for  furnishing  water  for  manufacturing  purposes  solely 
was  not  a  public  use,  the  erection  of  a  dam  to  improve  navi'ga- 
tion  of  a  river  was  a  public  use,  and  any  excess  of  water  over 
that  needed  for  the  public  use  might  be  sold  for  manufactur- 
ing purposes.     Brown,  J.,  said: 

"The  improvement  of  the  navigation  of  a  river  is  a  public 
purpose,  and  the  sequestration  or  appropriation  of  land  or 
other  property,  therefore,  for  such  purpose  is  doubtless  a 
proper  exercise  of  the  authority  of  the  state  under  its  power 
of  eminent  domain.  Upon  the  other  hand,  it  is  probably  true 
that  it  is  beyond  the  competency  of  the  state  to  appropriate 
to  itself  the  property  of  individuals  for  the  sole  purpose  of 
creating  a  water-power  to  be  leased  for  manufacturing  pur- 
poses. This  would  be  a  case  of  taking  the  property  of  one 
man  for  the  benefit  of  another,  which  is  not  a  constitutional 
exercise  of  the  right  of  eminent  domain." 

§  259.  Upon  the  question  of  compensation  for  property 
taken,  in  holding  that  complainant  had  waived  its  rights  for 
damages  by  not  complying  with  the  act  while  in  force,  Brown, 
J.,  said : 

"Where  a  statute  for  the  condemnation  of  lands  provides  a 
definite  and  complete  remedy  for  obtaining  compensation,  this 
remedy  is  exclusive;  the  common-law  remedy  or  proceeding 
is  superseded  by  the  statute,  and  the  owner  must  pursue  the 
course  pointed  out  by  it.  Mills  on  Eminent  Domain,  sees. 
87,  88.  It  is  true  that,  if  the  statutory  remedy  be  incomplete 
or  imperfect,  the  owner  is  not  thereby  debarred  from  his 
common-law  remedy,  and  may  recover  his  damages  in  an  ac- 
tion of  trespass  or  ejectment." 


§  260  EMINENT   DOMAIN.  206 

§  260.  In  Fallbrook  Irrigation  District  v.  Bradley,  164 
U.  S.  112,  it  was  held  that  taking  land  for  irrigation  by  way  of 
enforcing  an  assessment  under  an  act  establishing  an  irrigation 
district  of  arid  lands  was  not  taking  property  without  due 
IDrocess  of  law,  irrigation  of  such  lands  being  a  public  use 
under  the  circumstances  of  the  case  at  bar.  Peckham,  J., 
said: 

"It  has  often  been  said  to  be  extremely  difficult  to  give  any 
sufficient  definition  of  what  is  embraced  within  the  phrase 
'due  process  of  law,'  as  used  in  the  constitutional  amendment 
under  discussion.  None  will  be  attempted  here.  It  was 
stated  by  Mr.  Justice  Miller,  in  Davidson  v.  New  Orleans,  96 
U.  S.  97,  104,  that  there  was  'abundant  evidence  that  there 
exists  some  strange  misconception  of  the  scope  of  this  pro- 
vision as  found  in  the  fourteenth  amendment.  In  fact,  it 
would  seem  from  the  character  of  many  of  the  cases  before 
us,  and  the  arguments  made  in  them,  that  the  clause  under 
consideration  is  looked  upon  as  a  means  of  bringing  to  the 
test  of  the  decision  of  this  court  the  abstract  opinions  of  every 
unsuccessful  litigant  in  a  state  court  of  the  justice  of  the 
decision  against  him  and  of  the  merits  of  the  legislation  on 
which  such  a  decision  may  be  founded.'  Of  course,  no  such 
jurisdiction  exists  or  is  claimed  to  exist  by  the  parties  here. 
It  is  at  the  same  time  most  difficult  to  set  certain  and  clear 
bounds  to  the  right  of  this  court  and  consequently  to  its  duty 
to  review  questions  arising  under  state  legislation  with  refer- 
ence to  this  amendment  as  to  due  process  of  law. 

"It  never  was  intended  that  the  court  should,  as  the  effect 
of  the  amendment,  be  transformed  into  a  court  of  appeal, 
where  all  decisions  of  state  courts  involving  merely  questions 
of  general  justice  and  equitable  considerations  in  the  taking 
of  property  should  be  submitted  to  this  court  for  its  deter- 
mination. The  final  jurisdiction  of  the  courts  of  the  states 
would  thereb}^  be  enormously  reduced  and  a  corresponding 
increase  in  the  jurisdiction  of  this  court  would  result,  and  it 
would  be  a  great  misfortune  in  each  case.  IMobile  County 
V.  Kimball,  102  U.  S.  691,  704;  Missouri  Pacific  Railway  v. 
Humes,  115  U.  S.  512,  520.  We  reiterate  the  statement  made 
in  Davidson  v.  New  Orleans,  supra,  that  'whenever  by  the 
laws  of  the  state  or  by  state  authority  a  tax,  assessment,  ser- 
vitude or  other  burden  is  imposed  upon  property  for  the 
public  use,  whether  it  be  for  the  whole  state  or  of  some  more 
limited  portion  of  the  community,  and  those  laws  provide  for 
a  mode  of  confirming  or  contesting  the  change  thus  imposed 
in  the  ordinary  courts  of  justice,  with  such  notice  to  the  per- 


207  PUBLIC  USE.  §  261 

son  or  such  proceeding  in  regard  to  the  property  as  is  appro- 
priate to  the  nature  of  the  case,  the  judgment  in  such  pro- 
ceedings cannot  be  said  to  deprive  the  owner  of  his  property 
without  due  process  of  law,  however  obnoxious  it  may  be  to 
the  other  objections.' 

§  261.  "Coming  to  a  review  of  these  various  objections,  we 
think  the  first,  that  the  water  is  not  for  a  public  use,  is  not  well 
founded.  The  question,  what  constitutes  a  public  use,  has 
been  before  the  courts  of  many  of  the  states,  and  their  de- 
cisions have  not  been  harmonious,  the  inclination  of  some  of 
these  courts  being  toward  a  narrower  and  more  limited  defi- 
nition of  such  use  than  those  of  others. 

"There  is  no  specific  prohibition  in  the  federal  constitution 
which  acts  upon  the  states  in  regard  to  their  taking  private 
property  for  any  but  a  public  use.  The  fifth  amendment, 
which  provides,  among  other  things,  that  such  property  shall 
not  be  taken  for  public  use  without  ju.st  compensation,  ap- 
plies only  to  the  federal  government,  as  has  many  times  been 
decided.  Spies  v.  Illinois,  123  U.  S.  131;  Thorington  v. 
Montgomery,  147  U.  S.  490.  In  the  fourteenth  amendment 
the  provision  regarding  the  taking  of  private  property  is 
omitted,  and  the  prohibition  against  the  state  is  confined  to 
its  depriving  any  person  of  life,  liberty  or  property  Avithout 
due  process  of  law.  It  is  claimed,  however,  that  the  citizen 
is  deprived  of  his  property  without  due  process  of  law  if  it 
be  taken  by  or  under  state  authority  for  any  other  than 
a  public  use,  either  under  the  guise  of  taxation  or  by  the 
assumption  of  the  right  of  eminent  domain.  In  that  way 
the  question  whether  private  property  has  been  taken  for 
any  other  than  a  public  use  becomes  material  in  this  court, 
even  where  the  taking  is  under  the  authority  of  the  state 
instead  of  the  federal  government. 

"Is  this  assessment,  for  the  nonpayment  of  which  the  land 
of  the  plaintiff  was  to  be  sold,  levied  for  a  public  purpose? 
The  question  has,  in  substance,  been  answered  in  the  affirma- 
tive by  the  people  of  California,  and  by  the  legislative  and 
judicial  branches  of  the  state  government.  The  people  of 
the  state  adopted  a  constitution,  which  contains  this  pro- 
vision : 

"  'Water  and  Water  Rights. — Sec.  1.  The  use  of  all  water 
now  appropriated  or  that  may  hereafter  be  appropriated,  for 
sale,  rental  or  distribution,  is  hereby  declared  to  be  a  public 
use  and  subject  to  the  regulation  and  control  of  the  state 
in  the  manner  to  be  prescribed  by  law.'  Constitution  of 
California,  art,  14. 


§  262  EMINENT   DOMAIN.  208 

"The  latter  part  of  §  12  of  the  act  now  under  considera- 
tion, as  amended  in  March,  1891,  reads  as  follows: 

"  'The  use  of  all  water  required  for  the  irrigation  of  the 
lands  of  any  district  formed  under  the  provisions  of  this  act 
together  with  the  rights  of  way  for  canals  and  ditches,  sites 
for  reservoirs,  and  all  other  property  required  in  fully  car- 
rying out  the  provisions  of  this  act  is  hereby  declared  to  be 
a  public  use,  subject  to  the  regulation  and  control  of  the 
state,  in  the  manner  prescribed  by  law,' 

§  262.  "The  supreme  court  of  California  has  held  in  a  num- 
ber of  cases  that  the  irrigation  act  is  in  accordance  with  the 
state  constitution,  and  that  it  does  not  deprive  the  land  owners 
of  any  property  without  due  process  of  law ;  that  the  use  of 
the  water  for  irrigating  purposes  under  the  provisions  of 
the  act  is  a  public  use,  and  the  corporations  organized  by 
virtue  of  the  act  for  the  purpose  of  irrigation  are  public 
municipal  corporations,  organized  for  the  promotion  of  the 
prosperity  and  welfare  of  the  people.  Turlock  Irrigation 
District  v.  Williams,  76  California,  360;  Central  Irrigation 
District  v.  De  Lappe,  79  California,  351 ;  In  re  Madera  Irri- 
gation District,  92  California,  296.  We  do  not  assume  that 
these  various  statements,  constitutional  and  legislative,  to- 
gether with  the  decisions  of  the  state  court,  are  conclusive 
and  binding  upon  this  court  upon  the  question  as  to  what  is 
due  process  of  law,  and,  as  incident  thereto,  what  is  a  public 
use.  As  here  presented,  these  are  questions  which  also  arise 
under  the  federal  constitution,  and  we  must  decide  them  in 
accordance  with  our  views  of  constitutional  law.  It  is  obvious, 
however,  that  what  is  a  public  use  frequently  and  largely 
depends  upon  the  facts  and  circumstances  surrounding  the 
particular  subject  matter  in  regard  to  which  the  character  of 
the  use  is  questioned. 

"To  provide  for  the  irrigation  of  lands  in  states  where 
there  is  no  color  of  necessity  therefor  within  any  fair  mean- 
ing of  the  term,  and  simply  for  the  purpose  of  gratifying 
the  taste  of  the  owner,  or  his  desire  to  enter  upon  the  culti- 
vation of  an  entirely  new  kind  of  crop,  not  necessary  for  the 
purpose  of  rendering  the  ordinary  cultivation  of  the  land 
reasonably  remunerative,  might  be  regarded  by  courts  as  an 
improper  exercise  of  legislative  will,  and  the  use  might  not 
be  held  to  be  public  in  any  constitutional  sense,  no  matter 
how  many  owners  were  interested  in  the  scheme.  On  the 
other  hand,  in  a  state  like  California,  which  confessedly  em- 
braces millions  of  acres  of  arid  lands,  an  act  of  the  legis- 
lature providing  for  their  irrigation  might  well  be  regarded 


209  PUBLIC  USE.  §263 

as  an  act  devoting  the  water  to  a  public  use,  and  therefore 
as  a  valid  exercise  of  the  legislative  power.  The  people  of 
California  and  the  members  of  her  legislature  must,  in  the 
nature  of  things,  be  more  familiar  with  the  facts  and  circum- 
stances which  surround  the  subject  and  with  the  necessities 
and  the  occasion  for  the  irrigation  of  the  land.5  than  can  any- 
one be  who  is  a  stranger  to  her  soil.  This  knowledge  and 
familiarity  must  have  their  due  weight  with  the  state  courts 
which  are  to  pass  upon  the  question  of  public  use  in  the 
light  of  the  facts  which  surround  the  subject  in  their  own 
state.  For  these  reasons,  while  not  regarding  the  matter  as 
concluded  by  these  various  declarations  and  acts  and  decisions 
of  the  people  and  legislature  and  courts  of  California,  we  yet, 
in  the  consideration  of  the  subject,  accord  to  and  treat  them 
with  very  great  respect,  and  we  regard  the  decisions  as  em- 
bodying the  deliberate  judgment  and  matured  thought  of  the 
courts  of  that  state  on  this  question, 

§  263.  "Viewing  the  subject  for  ourselves  and  in  the  light 
of  these  considerations,  we  have  very  little  difficulty  in  coming 
to  the  same  conclusion  reached  by  the  courts  of  California. 

"The  use  must  be  regarded  as  a  public  use,  or  else  it  would 
seem  to  follow  that  no  general  scheme  of  irrigation  can  be 
formed  or  carried  into  effect.  In  general,  the  water  to  be 
used  must  be  carried  for  some  distance  and  over  or  through 
private  property  which  cannot  be  taken  in  invitum  if  the 
use  to  which  it  is  to  be  put  be  not  public,  and  if  there  be 
no  power  to  take  property  by  condemnation,  it  may  be  impos- 
sible to  acquire  it  at  all.  The  use  for  which  private  property 
is  to  be  taken  must  be  a  public  one,  whether  the  taking  be 
by  the  exercise  of  the  right  of  the  eminent  domain  or  by 
that  of  taxation.  Cole  v.  La  Grange,  113  U.  S.  1.  A  pri- 
vate company  or  corporation  without  the  power  to  acquire 
the  land  in  invitum  would  be  of  no  real  benefit,  and,  at  any 
rate,  the  cost  of  the  undertaking  would  be  so  greatly  enhanced 
by  the  knowledge  that  the  land  must  be  acquired  by  pur- 
chase, that  it  would  be  practically  impossible  to  build  the 
works  or  obtain  the  water.  Individual  enterprise  would  be 
equally  ineffectual;  no  one  owner  would  find  it  possible  to 
construct  and  maintain  waterworks  and  canals  any  better  than 
private  corporations  or  companies;  and  unless  they  had  the 
power  of  eminent  domain,  they  could  accomplish  nothing. 
If  that  power  could  be  conferred  upon  them,  it  could  only 
be  upon  the  ground  that  the  property  they  took  was  to  be 
taken  for  a  public  purpose. 
14 


§  264  EMINENT   DOMAIN.  210 

"While  the  consideration  that  the  work  of  irrigation  must 
be  abandoned  if  the  use  of  the  water  may  not  be  held  to  be 
or  constitute  a  public  use  is  not  to  be  regarded  as  conclusive 
in  favor  of  such  use,  yet  that  fact  is  in  this  case  a  most 
important  consideration.  Millions  of  acres  of  land  otherwise 
cultivable  must  be  left  in  their  present  arid  and  worthless 
condition,  and  an  effectual  obstacle  will  therefore  remain  in 
the  way  of  the  advance  of  a  large  portion  of  the  state  in 
material  wealth  and  prosperity.  To  irrigate  and  thus  to 
bring  into  possible  cultivation  these  large  masses  of  otherwise 
worthless  lands  would  seem  to  be  a  public  purpose,  and  a 
matter  of  public  interest  not  confined  to  the  land  owners  or 
even  to  any  one  section  of  the  state.  The  fact  that  the  use 
of  the  water  is  limited  to  the  land  owner  is  not,  therefore,  a 
fatal  objection  to  this  legislation.  It  is  not  essential  that  the 
entire  community,  or  even  any  considerable  portion  thereof, 
should  directly  enjoy  or  participate  in  an  im.provement  in 
order  to  constitute  a  public  use.  All  land  owners  in  the 
district  have  the  right  to  a  proportionate  share  of  the  water, 
and  no  one  land  owner  is  favored  above  his  fellow  in  his 
right  to  the  use  of  the  water.  It  is  not  necessary,  in  order 
that  the  use  should  be  public,  that  every  resident  in  the  dis- 
trict should  have  the  right  to  the  use  of  the  water.  The 
water  is  not  used  for  general  domestic  or  drinking  purposes, 
and  it  is  plain  from  the  scheme  of  the  act  that  the  water  is 
intended  for  the  use  of  those  who  will  have  occasion  to  use 
it  on  their  lands.  Nevertheless,  if  it  should  so  happen  that 
at  any  particular  time  the  land  ovv^ner  should  have  more 
water  than  he  wanted  to  use  on  his  land,  he  has  the  right 
to  sell  or  assign  the  surplus  or  the  whole  of  the  water  as  he 
may  choose. 

§  264.  "The  method  of  the  distribution  of  the  water  for 
irrigation  purposes,  provided  for  in  section  11  of  the  act,  is 
criticised  as  amounting  to  a  distribution  to  individuals  and  not 
to  lands,  and  on  that  account  it  is  claimed  that  the  use  for  irri- 
gation may  not  be  achieved,  and  therefore  the  only  purpose 
which  could  render  the  use  a  public  one  may  not  exist.  This 
claim  we  consider  not  well  founded  in  the  language  and  true 
construction  of  the  act.  It  is  plain  that  some  method  for  ap- 
portioning the  use  of  the  water  to  the  various  lands  to  be 
benefited  must  be  employed,  and  what  better  plan  than  to 
say  that  it  shall  be  apportioned  ratably  to  each  land  owner 
upon  the  basis  which  the  last  assessment  of  such  owner  for 
district  purposes  within  the  district  bears  to  the  whole  sum 
assessed  upon  the  district  1     Such  an  apportionment,  when  f ol- 


211  PUBLIC  USE.  §  265 

lowed  by  the  right  to  assign  the  whole  or  any  portion  of  the 
waters  apportioned  to  the  land  owner,  operates  with  as  near 
an  approach  to  justice  and  equality  as  can  be  hoped  for  in 
such  matters,  and  does  not  alter  the  use  from  a  public  to  a 
private  one.  This  right  of  assignment  may  be  availed  of 
also  by  the  owner  of  any  lands  which,  in  his  judgment,  would 
not  be  benefited  by  irrigation,  although  the  board  of  super- 
visors may  have  otherwise  decided.  We  think  it  clearly  ap- 
pears that  all  who  by  reason  of  their  ownership  of  or  connec- 
tion with  any  portion  of  the  lands  would  have  occasion  to 
use  the  water,  would  in  truth  have  the  opportunity  to  use  it 
upon  the  same  terms  as  all  others  similarly  situated.  In  this 
way  the  use,  so  far  as  this  point  is  concerned,  is  public,  be- 
cause all  persons  have  the  right  to  use  the  water  under  the 
same  circumstances.     This  is  sufficient 

§  265.  "It  is  insisted  that  the  basis  of  the  assessment  upon 
the  lands  benefited,  for  the  cost  of  the  construction  of  the  works, 
is  not  in  accordance  with,  and  in  proportion  to,  the  benefits  con- 
ferred by  the  improvement,  and  therefore  there  is  a  violation  of 
the  constitutional  amendment  referred  to,  and  a  taking  of  the 
property  of  the  citizen  without  due  process  of  law.  Although 
there  is  a  marked  distinction  between  an  assessment  for  a 
local  improvement  and  the  levy  of  a  general  tax,  yet  the 
former  is  still  the  exercise  of  the  same  power  as  the  latter, 
both  having  their  source  in  the  sovereign  power  of  taxation. 
Whatever  objections  may  be  urged,  to  this  kind  of  an  assess- 
ment, as  being  in  violation  of  the  state  constitution,  yet  as 
the  state  court  has  held  them  to  be  without  force,  we  follow 
its  judgment  in  that  case,  and  our  attention  must  be  directed 
to  the  question  whether  any  violation  of  the  federal  constitu- 
tion is  shown  in  such  an  assessment.  Can  an  ad  valorem 
assessment  on  the  land  benefited,  or,  in  other  words,  can  such 
an  assessment  as  is  provided  for  in  sections  18,  20,  21  and 
22  of  the  act,  be  legally  levied  in  such  a  case  as  this  ?  Assume 
that  the  only  theory  of  these  assessments  for  local  improve- 
ments upon  which  they  can  stand  is  that  they  are  imposed 
on  account  of  the  benefits  received,  and  that  no  land  ought 
in  justice  to  be  assessed  for  a  greater  sum  than  the  benefits 
received  by  it,  yet  it  is  plain  that  the  fact  of  the  amount 
of  benefits  is  not  susceptible  of  that  accurate  determination 
which  appertains  to  a  demonstration  in  geometry.  Some 
means  of  arriving  at  this  amount  must  be  used,  and  the  same 
method  may  be  more  or  less  accurate  in  different  cases  in- 
volving different  facts.  Some  choice  is  to  be  made,  and 
where  the  fact  of  some  benefit  accruing  to  all  the  lands  has 


§  266  EMINENT   DOMAIN.  212 

been  legally  found,  can  it  be  that  the  adoption  of  an  ad 
valorem  method  of  assessing  the  lands  is  to  be  held  a  violation 
of  the  federal  constitution?  It  seems  to  us  clearly  not.  It 
is  one  of  those  matters  of  detail  in  arriving  at  the  proper  and 
fair  amount  and  proportion  of  the  tax  that  is  to  be  levied  on 
the  land  with  regard  to  the  benefits  it  has  received  which 
is  open  to  the  discretion  of  the  state  legislature,  and  with 
which  this  court  ought  to  have  nothing  to  do.  The  way  of 
arriving  at  the  amount  may  be  in  some  instances  inequitable 
and  unequal,  but  that  is  far  from  rising  to  the  level  of  a 
constitutional  problem  and  far  from  a  case  of  taking  prop- 
erty without  due  process  of  law An  objection  is  also 

urged  that  it  is  delegating  to  others  a  legislative  right,  that  of 
the  incorporating  of  public  corporations,  inasmuch  as  the 
act  vests  in  the  supervisors  and  the  people  the  right  to  say 
whether  such  a  corporation  shall  be  created,  and  it  is  said 
that  the  legislature  cannot  so  delegate  its  power,  and  that 
any  act  performed  by  such  a  corporation  by  means  of  which 
the  property  of  the  citizen  is  taken  from  him,  either  by  the 
right  of  eminent  domain  or  by  assessment,  results  in  taking 
such  property  without  due  process  of  law. 

"We  do  not  think  there  is  any  validity  to  the  argument. 
The  legislature  delegates  no  power.  It  enacts  conditions, 
upon  the  performance  of  which  the  corporation  shall  be  re- 
garded as  organized  with  the  powers  mentioned  and  described 
in  the  act." 

§•266.  In  support  of  the  rule  that  public  use  means  pur- 
poses promotive  and  productive  of  public  benefit,  the  following 
cases  are  noted :  Olmstead  v.  Camp,  33  Conn.  532 ;  Beekman  v. 
R.  Co.,  3  Paige  (N.  Y.),  45;  Seeley  v.  Sebastian,  4  Or.  25; 
Hand  Gold  Mining  Co.  v.  Parker,  59  Ga.  419 ;  Nash  v.  Clark, 
27  Utah,  158,  75  Pac.  371,  198  U.  S.  361;  Strickley  v. 
Mining  Co.,  28  Utah,  215,  78  Pac.  296,  200  U.  S.  527 ;  Talbot 
v.  Hudson,  16  Gray,  417;  Pittsburgh  v.  Scott,  1  Pa.  309,  314; 
Jacobs  V.  Clearview  Co.,  220  Pa.  388. 

The  following  decisions,  on  the  other  hand,  are  strongly  to 
the  effect  that  the  use  must  involve  use  by  the  public  to  be 
a  public  use :  Sholl  v.  German  Coal  Co.,  118  111.  427 ;  Matter 
of  Eureka  etc.  Co.,  96  N.  Y.  42 ;  Healy  Lumber  Co.  v.  Morris, 
33  Wash.  490,  74  Pac.  681 ;  State  v.  White  River  Power  Co., 
39  Wash.  648,  82  Pac.  150;  Varner  v.  Martin,  21  W.  Va. 
534;  Matter  of  Split  Rock  Cable  R.  R.  Co.,  128  N.  Y.  408, 


213  PUBLIC  USE.  §  266 

28  N.  E.  506 ;  Sisson  v.  Board,  128  Iowa,  442,  104  N.  W.  454 ; 
Arnsperger  v.  Crawford,  101  Md.  247 ;  Berrien  Co.  v.  Judge, 
133  Mich.  48,  94  N.  W.  379;  Minn.  Canal  &  Power  Co.  v! 
Koochiching  Co.,  97  Minn.  429,  107  N.  W.  405;  Matter  of 
Tuthill,  163  N.  Y.  133,  57  N.  E.  303 ;  Cozard  v.  Kanawha  Hard- 
wood Co.,  139  N.  C.  283,  51  S.  E.  932;  State  v.  Superior  Court, 
4:2  Wash.  660,  85  Pac.  666. 


§  270  EMINENT   DOMAIN.  214 


CHAPTER  XIII. 
TAKING  OF  PRIVATE  PROPERTY. 

§  270.  Private  property  includes  all  rights  appropriated 
and  owned  by  individual  persons,  natural  and  artificial,  to  the 
exclusion  of  others.  Such  private  rights  pertaining  to  land 
are  termed  "real  property";  such  private  rights  not  pertain- 
ing to  land  are  termed  "personal  property."  Real  property 
rights,  often  classed  as  corporeal  and  incorporeal,  may  per- 
haps, for  some  purposes,  be  more  accurately  and  clearly 
classed  as  possessory  and  nonpossessory ;  possessory  including 
all  rights  of  immediate  or  future  possession,  e.  g.,  estates  at 
will,  or  for  years  or  for  life  or  in  fee,  and  as  well  reversious, 
remainders,  executory  devises  and  all  future  interests;  non- 
possessory  rights  of  real  property  including  easements,  com- 
mons and  appurtenances  of  every  kind  in  and  upon  lands  of 
others  or  in  any  particular  lands,  irrespective  of  the  right 
of  possession. 

So,  likewise,  personal  property  rights  may  be  classed  as 
possessory,  including  all  rights  of  immediate  or  future  pos- 
session of  particular  chattels  or  chattel  interests,  and  non- 
possessory,  arising  out  of  grant  or  contract,  without  regard 
to  particular  chattels,  as,  e.  g.,  franchises,  annuities,  nego- 
tiable instruments,  and  the  like. 

The  appropriation  or  destruction  for  public  purposes  or 
objects  of  any  of  these  rights  under  the  power  of  eminent 
domain  constitutes  a  taking  of  private  property,  for  which 
compensation  must  be  made. 

Legislation,  however,  regulating  matters  of  public  import, 
such  as  the  navigability  of  a  river  or  a  health  statute  under 
the  police  power,  may  indirectly  damage  or  lessen  the  value 
of  such  rights,  and  still  not  constitute  a  taking  of  private 
property  for  which  compensation  must  be  made. 

Again,  the  legislature  may,  under  its  general  law-making 
power,  regulate  the  uses  to  which  persons  may  put  their  prop- 
erty, in  proper  cases  requiring  compensation  to  be  made  for 


215  TAKING   OF   PRIVATE   PROPERTY.  §  271 

damage  caused;  for  example,  authorizing  riparian  owners 
to  build  dams  upon  their  land,  causing  water  to  overflow 
others'  property  and  requiring  damages  to  be  assessed  and 
paid  therefor,  but  this  is  rather  a  property  regulation  than 
a  taking  of  property  for  public  use. 

So,  too,  the  exercise  of  the  power  of  taxation,  while  it  is 
a  taking  of  private  property  for  public  use,  is  not  a  taking 
in  the  sense  of  the  word  employed  in  connection  with  the 
power  of  eminent  domain,  for  in  taxation  the  taking  is  gen- 
eral, and  the  benefits  and  protection  of  life  and  property 
afforded  by  government  are  recognized  as  sufficient  compen- 
sation, but  the  taking  of  property  under  the  power  of  eminent 
domain  is  not  a  general,  but  a  particular,  taking,  for  which, 
therefore,  special  compensation  must  be  made. 

§  271.  In  Pumpelly  v.  Green  Bay  Company,  13  Wall.  166, 
it  was  held  that  a  dam  causing  water  to  overflow  plaintiff's 
land  was  a  taking  of  property  that  must  be  compensated. 
Miller,  J.,  said: 

"In  the  case  of  Gardner  v.  Newburgh  (2  Johnson's  Chan. 
N.  Y.  162),  Chancellor  Kent  granted  an  injunction  to  pre- 
vent the  trustees  of  Newburg  from  diverting  the  water  of  a 
certain  stream  flowing  over  plaintifi"s  land  from  its  usual 
course,  because  the  act  of  the  legislature  which  authorized 
it  had  made  no  provision  for  compensating  the  plaintiff  for 
the  injury  thus  done  to  his  land.  And  he  did  this  though 
there  was  no  provision  in  the  constitution  of  New  York  such 
as  we  have  mentioned,  and  though  he  recognized  that  the 
water  was  taken  for  a  public  use.  After  citing  several  con- 
tinental jurists  on  this  right  of  eminent  domain,  he  says  that 
while  they  admit  that  private  property  may  be  taken  for 
public  uses  when  public  necessity  or  utility  requires,  they 
all  lay  it  down  as  a  clear  principle  of  natural  equity  that 
the  individual  whose  property  is  thus  sacrificed  must  be 
indemnified.  And  he  adds  that  the  principles  and  practice 
of  the  English  government  are  equally  explicit  on  this  point. 
It  will  be  seen  in  this  case  that  it  was  the  diversion  of  the 
water  from  the  plaintiff's  land  which  was  considered  as 
taking  private  property  for  public  use,  but  which,  under  the 
argument  of  defendants'  counsel,  would,  like  overflowing  the 
land,  be  called  only  a  consequential  injury. 

"If  these  be  correct  statements  of  the  limitations  upon  the 
exercise  of  the  right  of  eminent  domain,  as  the  doctrine  was 


§  272  EMINENT    DOMAIN.  216 

understood  before  it  had  the  benefit  of  constitutional  sanc- 
tion, by  the  construction  now  sought  to  be  placed  upon  the 
constitution  it  would  become  an  instrument  of  oppression 
rather  than  protection  to  individual  rights. 

"But  there  are  numerous  authorities  to  sustain  the  doc- 
trine that  a  serious  interruption  to  the  common  and  neces- 
sary use  of  property  may  be,  in  the  language  of  Mr.  Angell, 
in  his  work  on  Watercourses,  equivalent  to  the  taking  of  it, 
and  that  under  the  constitutional  provisions  it  is  not  neces- 
sary that  the  land  should  be  absolutely  taken 

"We  are  not  unaware  of  the  numerous  cases  in  the  state 
courts  in  which  the  doctrine  has  been  successfully  invoked 
that  for  a  consequential  injury  to  the  property  of  the  indi- 
vidual arising  from  the  prosecution  of  improvements  of  roads, 
streets,  rivers,  and  other  highways,  for  the  public  good,  there 
is  no  redress;  and  we  do  not  deny  that  the  principle  is  a 
sound  one,  in  its  proper  application  to  many  injuries  to 
property  so  originating.  And  when,  in  the  exercise  of  our 
duties  here,  we  shall  be  called  upon  to  construe  other  state 
constitutions,  we  shall  not  be  unmindful  of  the  weight  due 
to  the  decisions  of  the  courts  of  those  states.  But  we  are  of 
the  opinion  that  the  decisions  referred  to  have  gone  to  the 
uttermost  limit  of  sound  judicial  construction  in  favor  of 
this  principle,  and  in  some  cases  beyond  it,  and  that  it 
remains  true  that  where  real  estate  is  actually  invaded  by 
superinduced  additions  of  water,  earth,  sand,  or  other  mate- 
rial, or  by  having  any  artificial  structure  placed  on  it,  so  as 
to  efi'ectually  destroy  or  impair  its  usefulness,  it  is  a  taking 
within  the  meaning  of  the  constitution,  and  that  this  prop- 
osition is  not  in  conflict  with  the  weight  of  judicial  authority 
in  this  country,  and  certainly  not  with  sound  principle." 

§  272.  In  N.  Y.  Elevated  R.  R.  v.  Fifth  Nat.  Bank,  135 
U.  S.  432,  it  was  held  that  owners  of  property  abutting  a  street 
on  which  an  elevated  railroad  was  constructed  had  an  ease- 
ment of  way,  light  and  air,  for  deprivation  of  which  they 
were  entitled  to  compensation.     Gray,  J.,  said: 

"The  owners  of  lands  abutting  on  a  street  in  the  city  of 
New  York  have  an  easement  of  way,  and  of  light  and  air 
over  it;  and  through  a  bill  in  equity  for  an  injunction  may 
recover  of  the  elevated  railroad  company  full  compensation 
for  the  permanent  injury  to  this  easement." 

In  Spokane  Falls  &  N.  R.  Co.  v.  Ziegler,  167  U.  S.  65,  it 
was  held  that  a  settler  or  pre-emption  claimant  had  a  right 


217  TAKING   OF   PRIVATE   PROPERTY.  §  273 

of  property,  for  which  he  was  entitled  to  compensation  on 
the  land  being  seized  by  a  railroad  company.  Shiras,  J., 
said: 

"Passing  from  the  question  of  jurisdiction,  we  come  to  the 
contention  of  the  plaintiff  in  error  that  Ziegler,  as  a  mere 
settler  upon  the  lands  of  the  United  States,  although  with 
an  intention  to  obtain  title  to  the  same  under  the  pre-emption 
laws,  did  not  have  such  a  vested  interest  in  the  land  as  would 
avail  against  the  railway  company  in  asserting  its  right  of 
way  conferred  by  the  act  of  Congress.  An  answer  to  this 
question  is  furnished  by  the  case  of  Washington  &  Idaho 
Railroad  Co.  v.  Osbom,  160  U.  S.  103,  where  it  was  held 
that  a  railroad  company  whose  road  is  laid  out  so  as,  under 
the  provisions  of  the  act  of  March  3,  1875,  to  cross  a  part 
of  the  public  lands,  cannot  take  part  thereof  in  the  actual 
possession  and  occupation  of  a  settler  who  is  entitled  to  claim 
a  pre-emption  right  thereto  when  the  proper  time  shall  come, 
and  who  has  made  improvements  on  the  land  so  occupied  by 

him,  without    making  proper  compensation  therefor 

And  it  was  held  that  the  right  of  a  settler  in  possession  of 
unsurv-eyed  lands  of  the  United  States,  who  had  made  im- 
provements with  the  intention  of  procuring  a  title  under  the 
pre-emption  laws  as  soon  as  the  same  should  be  surveyed  by 
the  government,  was  a  possessory  claim  within  the  meaning 
of  the  statute,  for  which  compensation  must  be  made  by  a 
railroad  company  seeking  to  appropriate  a  part  of  it  for  its 
tracks. ' ' 

§  273.  In  Railway  Co.  v.  Renwick,  102  U.  S.  180,  where  a 
riparian  owner  abutting  the  Mississippi,  a  navigable  river,  had 
constructed  a  pier  or  boom  between  high  and  low  water  mark, 
it  was  held  that  though  the  state  owned  the  land  below 
high-water  mark,  and  the  pier  had  been  constructed  without 
authority  and  was  seemingly  subject  to  removal  at  the  in- 
stance of  the  public,  yet  it  was  private  property,  and  the 
railway  company  could  not  cross  it  or  appropriate  it  without 
making  compensation.     Waite,  C.  J.,  said: 

"The  public  does  not  complain,  but  the  railroad  company 
wants  the  improvements.  In  the  hands  of  the  company  they 
will  be  just  as  much  a  nuisance,  so  far  as  the  public  is  con- 
cerned, as  they  can  be  if  kept  up  by  the  owner.  As  between 
these  two  parties  the  improvements  are  the  property  of  the 
riparian  proprietor,  and  if  the  company  wants  them  for  its 
own  use,  it  must  make  compensation." 


§§274,275  EMINENT   DOMAIN.  218 

Respecting  title  to  tide  lands,  see  Shiveley  v.  Bowlby,  152 
U.  S.  1. 

§  274.  In  Hot  Springs  R.  R.  Co.  v.  Williamson,  136  U.  S. 
121,  in  affirming  a  decision  of  the  supreme  court  of  Arkansas 
that  a  railroad  company  constructing  its  road  in  a  public  street 
is,  under  the  constitution  of  Arkansas,  liable  to  abutting 
owners  for  consequential  damages  to  their  property,  Lamar, 
J.,  said  respecting  the  decision  of  the  state  court: 

"It  further  held  that  the  contention  of  the  plaintiff  in 
error  that  the  act  of  Congress  invested  it  with  an  absolute 
title  to  the  street  along  which  its  road  was  located,  and  ex- 
empted it  from  any  liability  for  consequential  damages  re- 
sulting to  an  abutting  owner  from  the  laying  of  its  track  in 
a  proper  and  skillful  manner,  was  founded  upon  cases  aris- 
ing under  the  familiar  constitutional  restriction  that  private 
property  shall  not  be  taken  for  public  use  without  compensa- 
tion, which  decisions  generally  turned  upon  the  question. 
What  is  a  taking  within  the  meaning  of  such  provision? 
That  the  constitution  of  that  state  of  1878,  which  provides 
that  'private  property  shall  not  be  taken,  appropriated  or 
damaged  for  public  use  without  just  compensation,'  has 
changed  that  rule;  that  all  the  decisions  rendered  under  sim- 
ilar constitutional  provisions  concur  in  holding  that  the  use 
of  a  street  by  a  railroad  company  as  a  site  for  its  track, 
under  legislative  or  municipal  authority,  when  it  interferes 
with  the  rights  of  adjoining  lot  owners  to  the  use  of  the 
street  as  a  means  of  ingress  and  egress,  subjects  the  railroad 
company  to  an  action  for  damages,  on  account  of  the  diminu- 
tion of  the  value  of  the  property  caused  by  such  use;  and 
lastly,  that  even  conceding  the  authority  of  the  towTi  of  Hot 
Springs  to  pass  the  ordinance  authorizing  the  company  to 
construct  and  maintain  the  railroad  embankment  track  and 
turntable  complained  of,  it  cannot  impair  the  constitutional 
right  of  the  defendant  in  error  to  compensation." 

§  275.  In  Richmond  etc.  R.  R.  Co.  v.  Louisa  R.  R.  Co.,  13 
How.  70,  in  holding  that  a  state  legislature,  although  it  had 
given  one  company  an  exclusive  right  to  build  a  railroad  be- 
tween two  points,  could  authorize  a  second  company  to  cross 
the  road  of  the  first  company  without  impairing  the  obligation 
of  contracts,  Grier,  J.,  said: 

"The  grant  of  a  franchise  is  of  no  higher  order  and  confers 
no  more  sacred  title  than  a  grant  of  land  to  an  individual; 


219  TAKING   OF   PRIVATE   PROPERTY.  §  276 

and  when  the  public  necessities  require  it,  the  one,  as  well 
as  the  other,  may  be  taken  for  public  purposes  on  making 
suitable  compensation  ;  nor  does  such  an  exercise  of  the  right 
of  eminent  domain  interfere  with  the  inviolability  of  con- 
tracts.    See  West  River  Bridge  Co.  v.  Dix,  6  How.  507." 

But  the  legislature  will  not  be  presumed  to  have  abandoned 
the  former  use  for  the  new  one  without  clear  expression  of 
such  intention.  (Matter  of  N.  Y.  etc.  R.  R.  Co.,  20  Hun 
(N.  Y.),  201.) 

In  Greenwood  v.  Freight  Co.,  105  U.  S.  13,  in  holding  that 
a  legislature  having  power  of  repeal  could  repeal  the  char- 
ter of  an  old  company  and  authorize  a  new  company  to 
take  such  of  the  property  and  franchises  of  the  old  company 
as  are  necessary  for  public  use  on  making  due  compensation 
therefor,  Miller,  J.,  said: 

"That  in  creating  the  later  corporation,  whose  object  was 
to  fulfill  a  public  use,  it  could  authorize  it  to  take  such 
propeirty  of  other  corporations  as  might  be  necessary  to 
that  use  as  well  as  that  of  individuals,  can  hardly  admit  of 
question.  Section  4  of  the  act  gives  this  power  to  the  Union 
company,  with  reference  to  the  tracks  of  all  street  railroads 
in  the  city,  and  provides  that  in  the  event  of  an  inability  to 
a^ree  with  the  owners  of  these  tracks  as  to  compensation, 
that  shall  be  determined  in  accordance  with  the  provisions 
of  general  laws  previously  enacted  on  that  subject.  To  this 
there  can  be  no  valid  legal  objection.  The  property  of  cor- 
porations, even  including  their  franchises,  when  that  is  neces- 
sary, may  be  taken  for  public  use  under  the  power  of  eminent 
domain  on  making  due  compensation.  "West  River  Bridge 
Co,  V.  Dix,  6  How.  507;  Central  Bridge  Corporation  v. 
City  of  Lowell,  4  Gray  (Mass.),  474;  Boston  Water  Power 
Co.  V.  Boston  &  Worcester  R.  R.  Corporation,  23  Pick. 
(Mass.)  360;  Richmond  etc.  Railroad  Co.  v.  Louisa  R.  R.  Co., 
13  How.  71." 

§  276.  In  Long  Island  Water  Supply  Co.  v.  Brooklyn,  166 
U.  S.  685,  where  a  city  had  contracted  with  the  water  company 
for  water  supply  for  twenty-five  years,  it  was  held  that  the 
water  system  was  subject  to  condemnation  within  the  period, 
and,  the  statutes  so  providing,  that  the  assessment  of  damages 
by  commissioners  instead  of  a  jury  was  no  denial  of  due  pro- 
cess of  law.     Brewer,  J.,  said : 


§  277  EMINENT   DOMAIN.  220 

"The  true  view  is  that  the  condemnation  proceedings  do 
not  impair  the  contract,  do  not  break  its  obligations,  but 
appropriate  it,  as  they  do  the  tangible  property  of  the  com- 
pany to  public  uses Neither  can  it  be  said  that  there 

was  not  'due  process  of  law'  in  these  condemnation  proceed- 
ings. It  is  not  essential  that  the  assessment  of  damages  be 
made  by  a  jury.  Such  award  may  be  made  by  commissioners 
at  least  where  there  is  provision  for  a  review  of  their  pro- 
ceedings in  the  courts.  Central  Branch  Union  Pacific  Rail- 
road V.  Atchison,  Topeka  &  Santa  Fe  Railroad,  28  Kansas, 
453,  463 ;  Cooley  on  Const.  Lim.,  563.  And  sections  9  and  10 
of  the  act  of  1892,  under  which  these  proceedings  were  had, 
require  that  the  commissioners  make  and  file  a  report  of 
their  proceedings  and  determination  in  the  supreme  court 
of  the  county  of  Kings,  and  that  application  must  be  made 
to  that  court  for  a  confirmation  of  the  report;  that  notice 
of  such  application  must  be  given,  and  that  'upon  such 
application  the  court  may  confirm  the  report,  or  may  set  it 
aside  for  irregularity,  or  for  error  of  law  in  the  proceedings 
before  the  commissioners,  or  upon  the  ground  that  the  award, 
in  part  or  in  whole,  is  excessive  or  is  insufficient';  and  appeal 
was  allowed  from  the  decision  of  that  court  to  a  higher.  We 
do  not  question  the  proposition  that  form  is  not  the  only 
thing  essential  to  due  process.  We  said  in  the  recent  case 
of  Chicago,  Burlington  &  Quincy  Railroad  v.  Chicago,  166 
U.  S.  226,  'The  mere  form  of  the  proceeding  instituted 
against  the  owner,  even  if  he  be  admitted  to  defend,  cannot 
convert  the  process  used  into  due  process  of  law,  if  the  neces- 
sary result  be  to  deprive  him  of  his  property  without  com- 
pensation. ' 

"It  may  be  true,  as  contended,  that  as  construed  by  the 
court  of  appeals,  the  determination  of  the  commissioners  is 
conclusive  as  to  the  mere  value  of  the  property,  but  there 
is  no  denial  of  due  process  in  making  the  findings  of  fact  by 
the  triers  of  fact,  whether  commissioners  or  a  jury,  final  as 
to  such  facts,  and  leaving  open  to  the  courts  simply  the  in- 
quiry as  to  whether  there  was  any  erroneous  basis  adopted 
by  the  triers  in  their  appraisal,  or  other  errors  in  their  pro- 
ceedings. ' ' 

§  277.  In  Holyoke  Co.  v.  Lyman,  15  Wall.  500,  in  holding 
that  a  company  authorized  by  the  legislature  of  Massachusetts 
to  construct  a  dam  across  the  Connecticut  was  not,  even  if  it 
could  have  been,  exempted  from  constructing  fishways,  Clif- 
ford, J.,  said: 


221  TAKING   OP   PRIVATE   PROPERTY.  §  278 

"Public  rights,  in  all  jurisdictions,  are  subject  to  legis- 
lative control,  and  it  is  settled  law  in  Massachusetts,  and 
has  been  for  a  century  and  a  half,  including  her  colonial 
history,  that  the  right  of  fishery  in  such  rivers  as  the  Con- 
necticut and  Merrimac,  even  above  the  point  where  they  are 
navigable  for  boats  or  rafts,  and  the  right  to  erect  and  main- 
tain dams  to  create  water-power  for  mill  purposes,  are 
public  rights,  and  that  the  owners  of  such  rights  are  bound 
by  such  reasonable  regulations  as  the  state  may  make  and 
ordain  for  their  protection  and  enjoyment 

"Such  a  charter  may  doubtless  be  granted  to  build  a  dam 
across  a  river  whose  whole  course  is  within  the  state  granting 
the  franchise,  with  a  provision  exempting  the  corporation 
from  all  obligation  to  construct  such  fishway  for  the  free 
passage  of  the  fish,  as  the  enterprise  of  erecting  a  dam  to 
create  power  to  operate  mills  is  so  far  public  in  its  nature 
that  it  is  competent  for  the  legislature  to  exercise  the  power 
of  eminent  domain  to  accomplish  the  purpose,  if  suitable  pro- 
vision is  made  to  compensate  the  owners  of  the  property  or 
rights  condemned  under  that  power,  but  it  may  be  more 
doubtful  whether  the  legislature  of  a  state  can  make  a  con- 
tract with  such  a  corporation  authorizing  them  to  construct  a 
dam  across  a  river  flowing  through  two  or  more  states  which 
shall  permanently  exempt  the  grantees  from  all  such  obliga- 
tion and  destroy  forever  the  rights  of  fishery  in  the  river 
throughout  its  whole  course  from  its  source  to  its  confluence 
with  tide  waters." 

§  278.  In  Scranton  v.  Wheeler,  17»  U.  S.  141,  it  was  held 
that  the  erection  by  authority  of  Congress  of  a  pier  on  lands 
under  navigable  water  in  front  of  uplands  owned  by  an  individ- 
ual and  cutting  off  access  by  the  individual  was  not  a  taking  of 
private  property,  and  therefore  compensation  was  not  neces- 
sary, Shiras,  Gray  and  Peckham,  Justices,  dissenting  on  the 
ground  that,  though  the  land  under  navigable  water  belongs 
to  the  state,  access  by  adjacent  owner  to  the  navigable  water 
is  private  property,  the  taking  of  which  without  compensation 
could  not  be  justified.  Harlan,  J.,  in  the  opinion  of  the 
court,  said : 

"The  vital  question,  therefore,  is  the  one  heretofore  men- 
tioned, namely,  whether  the  prohibition  in  the  constitution  of 
the  United  States  of  the  taking  of  private  property  for  pub- 
lic use  without  just  compensation  has  any  application  to  the 
case  of  an  owner  of  land  bordering  on  a  public  navigable 


§  278  EMINENT   DOMAIN.  222 

river  whose  access  from  his  land  to  navigability  is  perma- 
nently lost  by  reason  of  the  construction  of  a  pier  restinsf  on 
submerged  lands  away  from,  but  in  front  of,  his  upland,  and 
which  pier  was  erected  by  the  United  States,  not  with  any 
intent  to  impair  the  rights  of  riparian  owners,  but  for  the 
purpose  only  of  improving  the  navigation  of  such  river. 

"Undoubtedly,  compensation  must  be  made  or  secured  to 
the  owner  M'hen  that  which  is  done  is  to  be  regarded  as  a 
taking  of  private  property  for  public  use  within  the  mean- 
ing of  the  fifth  amendment  of  the  constitution ;  and  of  course, 
in  its  exercise  of  the  power  to  regulate  commerce.  Congress 
may  not  override  the  provision  that  just  compensation  must 
be  made  when  private  property  is  taken  for  public  use.  What 
is  private  property  within  the  meaning  of  that  amendment, 
or  what  is  a  taking  of  private  property  for  public  use,  is  not 
always  easy  to  determine.  No  decision  of  this  court  has  an- 
nounced a  rule  that  will  embrace  every  case.  But  what  has 
been  said  in  some  cases  involving  the  general  question  will 
a.ssist  us  in  determining  whether  the  present  plaintiff  has 
been  denied  the  protection  secured  by  the  constitutional  pro- 
vision in  question But  the  contention  is  that  compensa- 
tion must  be  made  for  the  loss  of  the  plaintiff's  access  from 
his  upland  to  navigability  incidentally  resulting  from  the 
occupancy  of  the  submerged  lands,  even  if  the  construction 
and  maintenance  of  a  pier  resting  upon  them  be  necessary 
or  valuable  in  the  proper  improvement  of  navigation.  We 
cannot  assent  to  this  view.  If  the  riparian  owner  cannot 
enjoy  access  to  navigability  because  of  the  improvement  of 
navigation  by  the  construction  away  from  the  shore  line  of 
works  in  a  public  navigable  river  or  water,  and  if  such  right 
of  access  ceases  alone  for  that  reason  to  be  of  value,  there  is 
not,  within  the  meaning  of  the  constitution,  a  taking  of  pri- 
vate property  for  public  use,  but  only  a  consequential  injury 
to  a  right  which  must  be  enjoyed,  as  was  said  in  the  Yates 
Case,  10  Wall.  497,  'in  due  subjection  to  the  rights  of  the 
public' — an  injury  resulting  incidentally  from  the  exercise 
of  a  governmental  power  for  the  benefit  of  the  general  public, 
and  from  which  no  duty  arises  to  make  or  secure  compensa- 
tion to  the  riparian  owner.  The  riparian  owner  acquired  the 
right  of  access  to  navigability,  subject  to  the  contingency  that 
such  right  might  become  valueless  in  consequence  of  the  erec- 
tion, under  competent  authority,  of  structures  on  the  sub- 
merged lands  in  front  of  his  property  for  tlie  purpose  of  im- 
proving navigation.  When  erecting  the  pier  in  question,  the 
government  had  no  object  in  view  except,  in  the  interest  of 
the  public,  to  improve  navigation.     It  was  not  designed,  arbi- 


223  TAKING   OF   PRIVATE   PROPERTY.  §  279 

trarily  or  capriciously,  to  destroy  rights  belonging  to  any 
riparian  owner.  What  was  done  was  manifestly  necessary 
to  meet  the  demands  of  international  and  interstate  commerce. 
In  our  opinion,  it  was  not  intended  that  the  paramount  au- 
thority of  Congress  to  improve  the  navigation  of  the  pul)lic 
navigable  waters  of  the  United  States  should  be  crippled  by 
compelling  the  government  to  make  compensation  for  the  in- 
jury to  a  riparian  owner's  right  of  access  to  navigability 
that  might  incidentally  result  from  an  improvement  ordered 
by  Congress.  The  subject  with  which  Congress  dealt  was 
navigation.  That  which  was  sought  to  be  accomplished  was 
simply  to  improve  navigation  on  the  waters  in  question,  so 
as  to  meet  the  wants  of  the  vast  commerce  passing  and  to 
pass  over  them.  Consequently,  the  agents  designated  to  per- 
form the  work  ordered  or  authorized  by  Congress  had  the 
right  to  proceed  in  all  proper  ways  without  taking  into  ac- 
count the  injury  that  might  possibly  or  indirectly  result  from 
such  work  to  the  right  of  access  by  riparian  owners  to  navi- 
gability." 

§  279.  In  Gibson  v.  United  States,  166  U.  S.  269,  it  was 
held  that  the  construction  of  a  dike  by  the  United  States  in  the 
Ohio  river  opposite  claimant's  land,  practically  destroying  her 
landing,  was  not  a  taking  entitling  claimant  to  compensation. 
Fuller,  C.  J.,  said: 

"All  navigable  waters  are  under  the  control  of  the  United 
States  for  the  purpose  of  regulating  and  improving  naviga- 
tion, and  although  the  title  to  the  shore  and  submerged  soil 
is  in  the  various  states  and  individual  owners  under  them,  it 
is  always  subject  to  the  servitude  in  respect  of  navigation 
created  in  favor  of  the  federal  government  by  the  constitu- 
tion. South  Carolina  v.  Georgia,  93  U.  S.  4 ;  Shivelv  v. 
Bowlby,  152  U.  S.  1 ;  Eldridge  v.  Trezevant,  160  U.  S.  452. 

"In  South  Carolina  v.  Georgia  a  proposed  improvement  of 
the  Savannah  River  consisted  of  the  practical  closing  of  one 
channel  around  an  island  and  the  throwing  of  water  into  other 
channels,  to  the  substantial  improvement  of  the  harbor  of 
Savannah.  This  court  held  that,  in  view  of  the  general  rule, 
although  structures  deemed  by  Congress  to  be  in  aid  of  navi- 
gation might  in  fact  be  in  obstruction  of  certain  methods  of 
navigation  of  the  particular  stream,  their  construction  was, 
nevertheless,  within  the  federal  power,  and  Mr.  Justice 
Strong,  delivering  the  opinion  of  the  court,  said : 

"  'It  is  not,  however,  to  be  conceded  that  Congress  has  no 
power  to  oixler  obstructions  to  be  placed  in  the  navigable 


§  280  EMINENT   DOMAIN.  224 

waters  of  the  United  States,  either  to  assist  navigation  or  to 
change  its  direction  by  forcing  it  into  one  channel  of  a  river 
rather  than  the  other.  It  may  build  lighthouses  in  the  bed 
of  the  stream.  It  may  construct  jetties.  It  may  require  all 
navigators  to  pass  along  a  prescribed  channel,  and  may  close 
any  other  channel  to  their  passage.  If,  as  we  have  said,  the 
United  States  have  succeeded  to  the  powers  and  rights  of  the 
several  states,  so  far  as  control  over  interstate  and  foreign 
commerce  is  concerned ,  this  is  not  to  be  doubted.  Upon  this 
subject  the  case  of  Pennsylvania  v.  The  Wheeling  &  Belmont 
Bridge  Co.,  18  How.  421,  is  instructive.  There  it  was  ruled 
that  the  power  of  Congress  to  regulate  commerce  includes 
the  regulation  of  intercourse  and  navigation,  and  conse- 
quently the  power  to  determine  what  shall  or  shall  not  be 
deemed,  in  the  judgment  of  law,  an  obstruction  of  navigation. 
....  The  case  of  The  Clinton  Bridge,  10  Wall.  454,  is  in 
full  accord  with  this  decision.  It  asserts  plainly  the  power 
of  Congress  to  declare  what  is  and  what  is  not  an  illegal  ob- 
struction in  a  navigable  stream.' 

"In  Shively  v.  Bowlby,  the  leading  authorities  of  the  courts 
of  the  United  States,  and  of  most  of  the  states  and  of  Great 
Britain,  as  to  the  character  of  the  title  to  submerged  land  are 
considered,  and  the  conclusion  announced  that  the  title  is  in 
each  state,  with  full  power  in  the  state  legislature  to  confer 
it  on  individuals,  subject  at  all  times  to  the  servitude  of  the 
federal  government  for  regulation  and  improvement  of  navi- 
gation  

§  280.  "The  fifth  amendment  to  the  constitution  of  the 
United  States  provides  that  private  property  shall  not '  be  taken 
for  public  use  without  just  compensation.'  Here,  however,  the 
damage  of  which  Mrs.  Gibson  complained  was  not  the  result 
of  the  taking  of  any  part  of  her  property,  whether  upland  or 
submerged,  or  a  direct  invasion  thereof,  but  the  incidental 
consequence  of  the  lawful  and  proper  exercise  of  a  govern- 
mental power. 

"The  applicable  principle  is  expounded  in  Transportation 
Co.  V.  Chicago,  99  U.  S.  635.  In  that  case,  plaintiff,  being 
an  owner  of  lands  situated  at  the  intersection  of  La  Salle 
street,  in  Chicago,  with  the  Chicago  River,  upon  which  it  had 
valuable  dock  and  warehouse  accommodations,  with  a  numer- 
ous line  of  steamers  accustomed  to  land  at  that  dock,  was 
interrupted  in  his  use  thereof  by  the  building  of  a  tunnel 
under  the  Chicago  River  by  authority  of  the  state  legislature, 
in  accomplishing  which  work  it  was  necessary  to  tear  up  La 
Salle  street,  which  precluded  plaintiff  from  access  to  his  prop- 


225  TAKING   OP  PRIVATE  PROPERTY.  §  281 

erty  for  a  considerable  time ;  also  to  build  a  cofTer-dam  in  the 
Chicago  River,  which  excluded  his  vessels  from  access  to  his 
docks ;  and  such  an  injury  was  held  to  be  damnum  absque 
injuria.  This  court  said,  again  speaking  through  Mr.  Justice 
Strong:  'But  acts  done  in  the  proper  exercise  of  governmental 
powers,  and  not  directly  encroaching  upon  private  property, 
though  their  consequences  may  impair  its  use,  are  universally 
held  not  to  be  a  taking  within  the  meaning  of  the  constitutional 
provision.  They  do  not  entitle  the  owner  of  such  property  to 
compensation  from  the  state  or  its  agents,  or  give  him  any  right 
of  action.  This  is  supported  by  an  immense  weight  of  author- 
ity. Those  who  are  curious  to  see  the  decisions  will  find  them 
collected  in  Cooley  on  Constitutional  Limitations,  page  542,  and 
notes.  The  extremest  qualification  of  the  doctrine  is  to  be 
found,  perhaps,  in  Pumpelly  v.  Green  Bay  Company,  13 
Wall.  1&6,  and  in  Eaton  v.  Boston  Concord  etc.  Railroad,  51 
N.  H.  504.  In  those  cases  it  was  held  that  permanent  flood- 
ing of  private  property  may  be  regarded  as  a  "taking."  In 
those  cases  there  was  a  physical  invasion  of  the  real  estate  of 
the  private  owner  and  a  practical  ouster  of  his  possession. 
But  in  the  present  case  there  was  no  such  invasion.  No  entry 
was  made  upon  the  plaintiff's  lot.  All  that  was  done  was  for 
a  time  to  render  its  use  more  inconvenient.' 

"Moreover,  riparian  ownership  is  subject  to  the  obligation 
to  suffer  the  consequences  of  the  improvement  of  navigation 
in  the  exercise  of  the  dominant  right  of  the  government  in 
that  regard.  The  legislative  authority  for  these  works  con- 
sisted simply  in  an  appropriation  for  their  construction,  but 
this  was  an  assertion  of  a  right  belonging  to  the  government, 
to  which  riparian  property  was  subject,  and  not  of  a  right 
to  appropriate  private  property,  not  burdened  with  such  servi- 
tude, to  public  purposes." 

§  281.  In  United  States  v.  Alexander,  148  U.  S.  186,  it  was 
held  that  the  owner  of  a  well  on  land  near  to  but  not  on  the 
line  of  the  Washington  aqueduct,  which  was  destroyed  in  the 
construction  of  that  work,  was  entitled  to  recover  its  value 
from  the  United  States  under  the  provisions  of  the  act  of  Con- 
gress authorizing  the  work.     Shiras,  J.,  said : 

"  'There  may  be,'  said  this  court  in  the  case  of  Pumpelly 
v.  Green  Bay  Co.,  13  Wall.  166  (syllabus),  'such  serious  in- 
terruption to  the  common  and  necessary  use  of  property 
as  will  be  equivalent  to  a  taking  within  the  meaning  of  the 
constitution.'  The  cases  which  hold  that  remote  and  conso- 
ls 


§  282  EMINENT   DOMAIN.  226 

quential  injury  to  private  property  by  reason  of  authorized 
public  improvements  is  not  taking  such  property  for  public 
use  have  many  of  them  gone  to  the  utmost  limit  of  that  prin- 
ciple, and  some  beyond  it,  though  the  principle  is  a  sound 
one  in  its  proper  application  to  many  injuries  so  originating. 
"We  do  not  find  it  necessary  to  consider  on  which  side  of 
the  line  thus  suggested  the  present  case  would  fall,  for  we 
agree  with  the  court  below  in  thinking  that,  in  the  act  of  Con- 
gress, under  which  this  public  work  was  done,  are  found  pro- 
visions giving  an  express  remedy  for  property  damaged 
though  not  actuallv  taken."  (See  188  U.  S.  445;  192  U.  S. 
224;  197  U.  S.  577.) 

§  282.  In  Barney  v.  Keokuk,  94  U.  S.  324,  where  a  riparian 
owner  adjacent  to  the  Mississippi,  in  Iowa,  had  dedicated  a 
street  above  and  along  high-water  mark,  it  was  held  that  under 
the  laws  of  Iowa  railway  tracks  might  be  laid  in  the  streets  by 
public  authority,  without  the  consent  of  the  abutting  owner 
and  without  compensation,  and  that  whether  the  legal  title 
to  land  below  high-water  mark  was  in  the  state  or  in  the 
riparian  owner,  wharves  below  the  street  in  the  case  at  bar 
were  incidental  to  the  public  use  for  which  the  street  wa^ 
dedicated.     Bradley,  J".,  said: 

"We  agree  with  the  court  below  that  the  dedication  of  the 
streets  of  Keokuk  was  a  dedication  at  the  common  law,  and 
not  under  the  statute;  and  that  in  making  this  dedication  the 
original  proprietors  of  the  tract  reserved  the  title  to  the  soil 
in  the  street,  particularly  in  Water  street;  and  that  this  title 
went  with  the  several  lots  fronting  on  the  street  and  extended 
to  the  Mississippi  river.  Whether,  under  the  laws  of  Iowa, 
it  also  attached  to  the  new  ground  formed  by  filling  in  upon 
the  bed  of  the  river  is  not  so  clear.  It  appears  to  be  the 
settled  law  of  that  state  that  the  title  of  the  riparian  pro- 
prietors on  the  banks  of  the  Mississippi  extends  only  to  ordi- 
nary high-water  mark,  and  that  the  shore  between  high  and 
low  water  mark,  as  well  as  the  bed  of  the  river,  belongs  to 
the  state.  This  is  also  the  common  law  with  regard  to  navi- 
gable waters;  although  in  England  no  waters  are  deemed 
navigable  except  those  in  which  the  tide  ebbs  and  flows.  In 
this  country,  as  a  general  thing,  all  waters  are  deemed  navi- 
gable which  are  really  so;  and  especially  it  is  true  with  re- 
gard to  the  IMississippi  and  its  principal  branches.  The  ques- 
tion as  to  the  extent  of  the  riparian  title  was  elaborately 
discussed  in  the  case  of  McManus  v.  Carmichael,  3  Iowa,  1. 


227  TAKING   OF   PRIVATE   PROPERTY.  §§283,284 

The  above  conclusion  was  reached,  and  has  always  been  ad- 
hered to  in  that  state.  Haight  v.  The  City  of  Keokuk,  4 
Iowa,  199 ;  Tomlin  v.  Dubuque  etc.  Railroad  Co.,  32  id.  106. 


§  283.  "On  the  general  question  as  to  the  rights  of  the  pub- 
lic in  a  city  street,  we  cannot  see  any  material  difference  in 
principle,  with  regard  to  the  extent  of  those  rights,  whether  the 
fee  is  in  the  public  or  in  the  adjacent  land  owner  or  in  some 
third  person.  In  either  case,  the  street  is  legally  open  and 
free  for  the  public  passage  and  for  such  other  public  uses  as 
are  necessary  in  a  city,  and  do  not  prevent  its  use  as  a 
thoroughfare,  such  as  the  laying  of  water-pipes,  gas-pipes  and 
the  like;  and,  according  to  the  laws  of  Iowa  (which  must  be 
taken  to  govern  the  case),  it  may  be  occupied  by  those  im- 
proved iron  ways  for  public  passage  which  modern  skill  has 
devised,  and  which  the  advance  of  general  improvement  re- 
quires  

"By  the  construction  given  to  this  act  (Iowa  statute)  by 
the  supreme  court  of  the  state,  railroads,  especially  when 
located  and  constructed  under  municipal  regulation  and  con- 
trol, are  not  regarded  as  obstructions  to  a  highway  in  the  legal 
sense,  nor  as  creating,  when  laid  thereon,  any  injury  to  the 
proprietors  of  the  adjacent  lands,  for  which  they  are  entitled 
to  compensation."  (14  L.  R.  A.  381;  43  L.  R.  A.  554;  17  L. 
R.  A.  474 ;  24  L.  R.  A.  721 ;  2  L.  R.  A.,  N.  S.,  598 ;  3  L.  R.  A., 
N.  S.,  323;  4  L.  R.  A.,  N.  S.,  202;  7  L.  R.  A.,  N.  S.,  87,  506.) 

§  284.  In  County  of  Mobile  v.  Kimball,  102  U.  S.  691,  in 
holding  that  an  issue  of  county  bonds  for  a  river  improvement 
to  be  ultimately  paid  by  taxation  was  not  a  taking  of  private 
property  for  public  use  within  the  meaning  of  the  constitution. 
Field,  J.,  distinguishing  taxation,  said: 

"The  issue  by  the  president  and  commissioners  of  revenue 
of  Mobile  county  of  bonds  for  the  improvement  of  the  river, 
bay  and  harbor  of  INIobile  was  not  a  taking  of  private  property 
for  public  use  within  the  meaning  of  the  constitutional  clause. 
It  was  a  loan  of  the  credit  of  the  county  for  a  work  public  in 
its  character  designed  to  be  of  general  benefit  to  the  state,  but 
more  especially  and  immediately  to  the  county.  The  expenses 
of  the  work  were  of  course  to  be  ultimately  defrayed  by 
taxation  upon  the  property  and  people  of  the  county.  But 
neither  is  taxation  for  a  public  purpose,  however  great,  the 
taking  of  private  property  for  public  use,  in  the  sense  of  the 
constitution.     Taxation  only  exacts  a  contribution  from  indi- 


§  285  EMINENT    DOMAIN.  228 

viduals  of  the  state  or  of  a  particular  district,  for  the  support 
of  the  government,  or  to  meet  some  public  expenditure  au- 
thorized by  it,  for  which  they  receive  compensation  in  the 
protection  which  government  affords,  or  in  the  benefits  of  the 
special  expenditure.  But  when  private  property  is  taken  for 
public  use,  the  owner  receives  full  compensation.  The  taking 
differs  from  a  sale  by  him  only  in  that  the  transfer  of  title 
may  be  compelled,  and  the  amount  of  compensation  be  deter- 
mined by  a  jury  or  officers  of  the  government  appointed  for 
that  purpose.  In  the  one  case  the  party  bears  only  a  share 
of  the  public  burdens;  in  the  other  he  exchanges  his  prop- 
erty for  its  equivalent  in  money.  The  two  things  are  essen- 
tially different." 

§  285.  In  Head  v.  Amoskeag  Mfg.  Co.,  113  U.  S.  9,  in  hold- 
ing that  a  statute  of  a  state  authorizing  any  person  to  erect  and 
maintain  on  his  own  land  a  w^ater-mill  and  mill  dam  and  across 
any  stream  not  navigable,  paying  to  the  owners  of  lands 
flowed  damages  assessed  in  a  judicial  proceeding,  is  a  proper 
regulation  of  the  property  rights  of  riparian  owners,  and  does 
not  deprive  them  of  their  property  without  due  process  of 
law.  Gray,  J.,  said: 

"It  has  been  held  in  many  cases  of  high  authority  that  spe- 
cial acts  of  incorporation,  granted  by  the  legislature  for  the 
establishment  of  dams  to  increase  and  improve  the  water- 
power  of  rivers  and  navigable  waters  for  mechanical  and 
manufacturing  purposes,  are  for  a  public  use.  Scudder  v. 
Trenton  Delaware  Falls  Co.,  Saxton,  694,  728,  729 ;  Boston  & 
Roxbury  Mill  Corporation  v.  Newman,  12  Pick.  467 ;  Hazen  v. 
Essex  Co.,  12  Cush.  475;  Commonwealth  v.  Essex  Co.,  13 
Gray,  239,  251,  252 ;  Hankins  v.  Lawrence,  8  Blackford,  266 ; 
Great  Falls  Manufacturing  Co.  v.  Fernald,  47  N.  H.  444. 
In  some  of  those  cases  the  authority  conferred  by  general 
mill  acts  upon  any  owner  of  land  upon  a  stream  to  erect  and 
maintain  a  mill  on  his  own  land  and  to  flow  the  land  of  others 
for  manufacturing  purposes  has  been  considered  as  resting  on 
the  right  of  eminent  domain,  by  reason  of  the  advantages 
inuring  to  the  public  from  the  improvement  of  water-power 
and  the  promotion  of  manufactures.  See,  also,  Holyoke  Co. 
V.  Lyman,  15  Wall.  500,  506,  507 ;  Beekman  v.  Saratoga  & 
Schenectady  Railroad,  3  Paige,  45,  73 ;  Talbot  v.  Hudson,  16 
Gray,  417,  426.  And  the  validity  of  general  mill  acts,  when 
directly  controverted,  has  often  been  upheld  upon  that 
ground,  confirmed  by  long  usage  or  prior  decisions.     Jordan 


229  TAKING   OF   PRIVATE   PROPERTY.  §  285 

V.  "Woodward,  40  Maine,  317;  Olmstead  v.  Camp,  33  Conn. 
532;  Todd  v.  Austin,  34  Conn.  78;  Venard  v.  Cross,  8  Kansas, 
248;  Harding  v.  Funk,  8  Kansas,  315;  Miller  v.  Troost,  14 
Minnesota,  282;  Newcomb  v.  Smith,  1  Chandler,  71;  Fisher 
V.  Horican  Co.,  10  Wisconsin,  351;  Babb  v.  Mackey,  10  Wis- 
consin, 314;  Burnham  v.  Thompson,  55  Iowa,  421 The 

question  whether  the  erection  and  maintenance  of  mills  for 
manufacturing  purposes  under  a  general  mill  act,  of  which 
any  owner  of  land  upon  a  stream  not  navigable  may  avail 
himself  at  will,  can  be  upheld  as  a  taking,  by  delegation  of 
the  right  of  eminent  domain,  of  private  property  for  public 
use  in  the  constitutional  sense,  is  so  important  and  far-reach- 
ing, that  it  does  not  become  this  court  to  express  an  opinion 
upon  it  when  not  required  for  the  determination  of  the  rights 
of  the  parties  before  it.  We  prefer  to  rest  the  decision  of 
this  case  upon  the  ground  that  such  a  statute,  considered  as 
regulating  the  manner  in  which  the  rights  of  proprietors  of 
lands  adjacent  to  a  stream  may  be  asserted  and  enjoyed,  with 
a  due  regard  to  the  interests  of  all  and  to  the  public  good,  is 

within  the  constitutional  power  of  the  legislature The 

right  to  the  use  of  running  water  is  publici  juris,  and  common 
to  all  the  proprietors  of  the  bed  and  banks  of  the  stream  from 
its  source  to  its  outlet.  Each  has  a  right  to  the  reasonable 
use  of  the  water  as  it  flows  past  his  land,  not  interfering  with 
a  like  reasonable  use  by  those  above  or  below  him.  One 
reasonable  use  of  the  water  is  the  use  of  the  power,  inherent 
in  the  fall  of  the  stream  and  the  force  of  the  current  to  drive 
mills.  That  power  cannot  be  used  without  damming  up  the 
water  and  thereby  causing  it  to  flow  back.  If  the  water  thus 
dammed  up  by  one  riparian  proprietor  spread  over  the  lands 
of  others,  they  could  at  common  law  bring  successive  actions 
against  him  for  the  injury  so  done  them,  or  even  have  the 
dam  abated.  Before  the  mill  acts,  therefore,  it  was  often  im- 
possible for  a  riparian  proprietor  to  use  the  water-power  at 
all  without  the  consent  of  those  above  him.  The  purpose  of 
these  statutes  is  to  enable  any  riparian  proprietor  to  erect 
a  mill  and  use  the  water-power  of  the  stream,  provided  he 
does  not  interfere  with  an  earlier  exercise  by  another  of  a  like 
right  or  with  any  right  of  the  public ;  and  to  substitute,  for 
the  common-law  remedies  of  repeated  actions  for  damages  and 
prostration  of  the  dam,  a  new  form  of  remedy,  by  which  any- 
one whose  land  is  flowed  can  have  assessed  once  for  all,  either 
in  a  gross  sum  or  by  way  of  annual  damages,  adequate  com- 
pensation for  the  injury." 


§§286,287  EMINENT    DOMAIN.  230 

§  286.  In  Henderson  Bridge  Co.  v.  Henderson  City,  173 
U.  S.  592,  in  upholding  the  taxation  of  a  railroad  bridge  by  a 
municipality,  Harlan,  J.,  said : 

"It  is  conceivable  that  taxation  may  be  of  such  a  nature 
and  so  burdensome  as  properly  to  be  characterized  a  taking 
of  private  property  for  public  use  without  just  compensation. 
But  in  order  to  bring  taxation  imposed  by  a  state  or  under 
its  authority  within  the  scope  of  the  fourteenth  amendment 
of  the  national  constitution,  the  case  should  be  so  clearly  and 
palpably  an  illegal  encroachment  upon  private  rights  as  to 
leave  no  doubt  that  such  taxation,  by  its  necessary  operation, 
is  really  spoliation  under  the  guise  of  exerting  the  power  to 
tax." 

§  287.  In  Norwood  v.  Baker,  172  U.  S.  269,  it  was  held 
that  a  special  assessment  against  property  abutting  a  street  im- 
provement, made  on  a  basis  and  under  a  rule  excluding  inquiry 
as  to  benefits  received  by  or  accruing  to  the  abutting  property, 
was  illegal,  as  taking  property  without  due  process  of  law 
to  the  extent  of  the  excess  of  the  cost  of  opening  the  street 
in  question  over  any  special  benefits  accruing  to  the  abutting 
property.     Harlan,  J.,  said  : 

"The  taking  of  the  plaintiff's  land  for  the  street  was  under 
the  power  of  eminent  domain — a  power  which  this  court  has 
said  was  the  offspring  of  political  necessity,  and  inseparable 
from  sovereignty  unless  denied  to  it  by  the  fundamental  law. 
Searl  v.  Lake  County  School  District,  133  U.  S.  553.  But 
the  assessment  of  the  abutting  property  for  the  cost  and  ex- 
pense incurred  by  the  village  was  an  exercise  of  the  power  of 
taxation.  Except  for  the  provision  of  the  constitution  of 
Ohio  above  quoted,  the  state  could  have  authorized  benefits 
to  be  deducted  from  the  actual  value  of  the  land  taken,  with- 
out violating  the  constitutional  injunction  that  compensation 
be  made  for  private  property  taken  for  public  use ;  for  the 
benefits  received  could  be  properly  regarded  as  compensation 
pro  tanto  for  the  property  appropriated  to  public  use.  But 
does  the  exclusion  of  benefits  from  the  estimate  of  compensa- 
tion to  be  made  for  the  property  actually  taken  for  public 
use  authorize  th(3  public  to  charge  upon  the  abutting  property 
the  sum  paid  for  it,  together  with  the  entire  costs  incurred 
in  the  condemnation  proceedings,  irrespective  of  the  question 
whether  the  property  was  benefited  by  the  opening  of  the 
street?  Undoubtedly,  abutting  owners  may  be  subjected  to 
special  assessments  to  meet  the  expenses  of  opening  public 


231  TAKING   OF    PRIVATE   IMIOPERTY.  §  287 

highways  in  front  of  their  property — such  assessments,  ac- 
cording to  well-established  principles,  resting  upon  the  ground 
that  special  burdens  may  be  imposed  for  special  or  peculiar 
benefits  accruing  from  public  improvements.  Mobile  County 
V.  Kimball,  102  U.  S.  691,  703,  704;  Illinois  Central  Railroad 
V.  Decatur,  147  U.  S.  190,  202;  Bauman  v.  Ross,  167  U.  S. 
548,  589,  and  authorities  there  cited.  And  according  to  the 
weight  of  judicial  authority,  the  legislature  has  a  large  dis- 
cretion in  defining  the  territory  to  be  deemed  specially  bene- 
fited by  a  public  improvement,  and  which  may  be  subjected 
to  special  assessment  to  meet  the  cost  of  such  improvements. 
In  Williams  v.  Eggleston,  170  U.  S.  304,  311,  where  the  only 
question,  as  this  court  stated,  was  as  to  the  power  of  the  legis- 
lature to  cast  the  burden  of  a  public  improvement  upon  cer- 
tain towns,  which  had  been  judicially  determined  to  be  towns 
benefited  by  such  improvement,  it  was  said:  'Neither  can  it 
be  doubted  that  if  the  state  constitution  does  not  prohibit,  the 
legislature,  speaking  generally,  may  create  a  new  taxing  dis- 
trict, determine  what  territory  shall  belong  to  such  district 
and  what  property  shall  be  considered  as  benefited  by  a  pro- 
posed improvement.'  But  the  power  of  the  legislature  in 
these  matters  is  not  unlimited.  There  is  a  point  beyond 
which  the  legislative  department,  even  w^hen  exerting  the 
power  of  taxation,  may  not  go  consistently  with  the  citizen's 
right  of  property.  As  already  indicated,  the  principle  under- 
lying special  assessments  to  meet  the  cost  of  public  improve- 
ments is  that  the  property  upon  which  they  are  imposed  is 
peculiarly  benefited,  and  therefore  the  owners  do  not,  in  fact, 
pay  anything  in  excess  of  what  they  receive  by  reason  of  such 
improvement.  But  the  guaranties  for  the  protection  of  pri- 
vate property  would  be  seriously  impaired  if  it  were  estab- 
lished, as  a  rule  of  constitutional  law,  that  the  imposition  by 
the  legislature  upon  particular  private  property  of  the  entire 
cost  of  a  public  improvement,  irrespective  of  any  peculiar 
benefits  accruing  to  the  owner  from  such  improvement,  could 
not  be  questioned  by  him  in  the  courts  of  the  country.  It  is 
one  thing  for  the  legislature  to  prescribe  it  as  a  general  rule 
that  property  abutting  on  a  street  opened  by  the  public  shall 
be  deemed  to  have  been  specially  benefited  by  such  improve- 
ment, and  therefore  should  specially  contribute  to  the  cost 
incurred  by  the  public.  It  is  quite  a  different  thing  to  lay 
it  down  as  an  absolute  rule  that  such  property,  whether  it  is 
in  fact  benefited  or  not  by  the  opening  of  the  street,  may  be 
assessed  by  the  front  foot  for  a  fixed  sum  representing  the 
whole  cost  of  the  improvement,  and  without  any  right  in  the 
property  owner  to  show,  when  an  assessment  of  that  kind  is 


§  288  EMINENT    DOMAIN.  232 

made  or  is  about  to  be  made,  that  the  sum  so  fixed  is  in  excess 
of  the  benefits  received.  In  our  judgment,  the  exaction  from 
the  owner  of  private  property  of  the  cost  of  a  public  improve- 
ment in  substantial  excess  of  the  special  benefits  accruing  to 
him  is,  to  the  extent  of  such  excess,  a  taking  under  the  guise 
of  taxation  of  private  property  for  public  use  without  com- 
pensation. We  say  'substantial  excess,'  because  exact  equal- 
ity of  taxation  is  not  alwaj^s  attainable,  and  for  that  reason 
the  excess  of  cost  over  special  benefits,  unless  it  be  of  a  mate- 
rial character,  ought  not  to  be  regarded  by  a  court  of  equity 
when  its  aid  is  invoked  to  restrain  the  enforcement  of  a  spe- 
cial assessment." 

§  288.  Brewer,  J.,  dissenting  on  the  ground  that  the  legis- 
lative act  was  itself  a  determination  of  the  benefits  accruing  to 
the  area  assessed,  said  : 

"The  legislative  act  charging  the  entire  cost  of  an  improve- 
ment upon  certain  described  property  is  a  legislative  deter- 
mination that  the  property  described  constitutes  the  area 
benefited,  and  also  that  it  is  benefited  to  the  extent  of  such 
cost.  It  is  unnecessary  to  inquire  how  far  courts  might  be 
justified  in  interfering  in  a  case  in  which  it  appeared  that 
the  legislature  had  attempted  to  cast  the  burden  of  a  public 
improvement  on  property  remote  therefrom  and  obviously  in 
no  way  benefited  thereby,  for  here  the  property  charged  with 
the  burden  of  the  improvement  is  that  abutting  upon  such 
improvement,  the  property  prima  facie  benefited  thereby,  and 
the  authorities  which  I  have  cited  declare  that  it  is  within 
the  legislative  power  to  determine  the  area  of  the  property 
benefited  and  the  extent  to  which  it  is  benefited.  It  seems 
to  me  strange  to  suggest  that  an  act  of  the  legislature  or  an 
ordinance  of  a  city  casting,  for  instance,  the  cost  of  a  sewer 
or  sidewalk  in  a  street  upon  all  the  abutting  property,  is  in- 
valid unless  it  provides  for  a  judicial  inquiry  whether  such 
abutting  property  is  in  fact  benefited,  and  to  the  full  cost  of 
the  improvement,  or  whether  other  property  might  not  also  be 
to  some  degree  benefited,  and  therefore  chargeable  with  part 
of  the  cost." 


233  COMPENSATION.  §§  290, 291 


CHAPTER  XIV. 

COMPENSATION. 

§  290.  The  right  to  compensation  for  private  property 
taken  for  public  use  is  fully  established  under  the  provisions  of 
the  federal  and  state  constitutions.  A  statute  cannot,  there- 
fore, validly  authorize,  directly  or  indirectly,  the  taking  of 
private  property  for  public  uses  except  upon  compensation 
first  made. 

This  applies  as  well  to  the  national  government  as  to  the 
state  governments  or  their  agencies.  Until  compensation  duly 
ascertained  is  paid  to  the  owner  or  into  court  for  him,  title 
to  the  property  condemned  remains  in  the  private  owner,  and 
while  a  company  may  enter  into  possession  on  the  institution 
of  proceedings,  if  it  attempts  to  retain  the  land  appropriated 
without  malting  compensation  it  is  but  a  trespasser.  On  the 
payment  of  compensation  duly  ascertained  title  passes. 

§  291.  In  Monongahela  Nav.  Co.  v.  United  States,  148  U.  S. 
312,  under  an  act  of  Congress  authorizing  the  Secretary  of  War 
to  purchase  or  condemn  a  lock  and  dam  for  water  improve- 
ments, providing  that  in  determining  the  sum  to  be  paid,  the 
franchise  to  take  tolls  should  not  be  estimated,  it  was  held 
that  the  franchise  could  be  taken  only  upon  making  com- 
pensation.    Brewer,  J.,  said: 

"Upon  what  does  the  right  of  Congress  to  interfere  in  the 
matter  rest?  Simply  upon  the  power  to  regulate  commerce. 
This  is  one  of  the  great  powers  of  the  national  govern- 
ment— one  whose  existence  and  far-reaching  extent  have  been 
affirmed  again  and  again  by  this  court  in  its  leading  opinions, 
and  the  power  of  Congress  over  such  natural  highways  as 
navigable  streams  is  confessedly  supreme 

"But  like  the  other  powers  granted  to  Congress  by  the  con- 
stitution, the  power  to  regulate  commerce  is  subject  to  all  the 
limitations  imposed  by  such  instrument,  and  among  them  is 
that  of  the  fifth  amendment  we  have  heretofore  quoted.  Con- 
gress has  supreme  control  over  the  regulation  of  commerce, 
but  if,  in  exercising  that  supreme  control,  it  deems  it  neces- 
sary to  take  private  property,  then  it  must  proceed  subject 


§  291  EMINENT   DOMAIN.  231 

to  the  limitations  imposed  by  this  fifth  amendment,  and  can 
take  only  on  payment  of  just  compensation.  The  power  to 
regulate  commerce  is  not  given  in  any  broader  terms  than 
that  to  establish  postoffices  and  post  roads;  but  if  Congress 
wishes  to  take  private  property  upon  which  to  build  a  post- 
office,  it  must  either  agree  upon  the  price  M^ith  the  owner,  or 
in  condemnation  pay  just  compensation  therefor.  And  if 
that  propert}^  be  improved  under  authority  of  a  charter 
granted  by  the  state,  Avith  a  franchise  to  take  tolls  for  the 
use  of  the  improvement,  in  order  to  determine  the  just  com- 
pensation, such  franchise  must  be  taken  into  account.  Be- 
cause Congress  has  power  to  take  the  property  it  does  not 
follow  that  it  may  destroy  the  franchise  without  compensa- 
tion. "Whatever  be  the  true  value  of  that  which  it  takes  from 
the  individual  owner  must  be  paid  to  him  before  it  can  be 
said  that  just  compensation  for  the  property  has  been  made. 
And  that  which  is  true  in  respect  to  a  condemnation  of  prop- 
erty for  a  postoffice  is  equally  true  when  condemnation  is 
sought  for  the  purpose  of  improving  a  natural  highway. 
Suppose,  in  the  improvement  of  a  navigable  stream,  it  was 
deemed  essential  to  construct  a  canal  with  locks,  in  order  to 
pass  around  rapids  or  falls.  Of  the  power  of  Congress  to 
condemn  whatever  land  may  be  necessary  for  such  canal, 
there  can  be  no  question;  and  of  the  equal  necessity  of  pay- 
ing full  compensation  for  all  private  property  taken,  there 
can  be  as  little  doubt.  If  a  man's  house  must  be  taken,  that 
must  be  paid  for ;  and  if  the  property  is  held  and  improved 
under  a  franchise  from  the  state,  with  power  to  take  tolls,  that 
franchise  must  be  paid  for,  because  it  is  a  substantial  element 
in  the  value  of  the  property  taken.  So  coming  to  the  case 
before  us,  while  the  power  of  Congress  to  take  this  property 
is  unquestionable,  yet  the  power  to  take  is  subject  to  the  con- 
stitutional limitation  of  just  compensation.  It  should  be  no- 
ticed that  here  there  is  unquestionably  a  taking  of  the  prop- 
erty and  not  a  mere  destruction.  It  is  not  a  case  in  which 
the  government  requires  the  removal  of  an  obstruction. 
What  differences  would  exist  between  the  two  cases,  if  any, 
it  is  unnecessary  here  to  inquire.  All  that  we  need  consider 
is  the  measure  of  compensation  when  the  government,  in  the 

exercise  of  its  sovereign  power,  takes  the  property It 

is  also  suggested  that  the  government  does  not  take  this  fran- 
chise; that  it  does  not  need  any  authority  from  the  state  for 
the  exaction  of  tolls,  if  it  desires  to  exact  them;  that  it  only 
appropriates  the  tangible  property,  and  then  either  makes  the 
use  of  it  free  to  all,  or  exacts  such  tolls  as  it  sees  fit,  or  trans- 
fers the  property  to  a  new  corporation  of  its  own  creation, 


235  COMPENSATION.  §  292 

with  such  a  franchise  to  take  tolls  as  it  chooses  to  give.  But 
this  franchise  goes  with  the  property;  and  the  navigation 
company,  which  owned  it,  is  deprived  of  it.  The  government 
talces  it  away  from  the  company,  whatever  use  it  may  make 
of  it;  and  the  question  of  just  compensation  is  not  determined 
by  the  vahie  to  the  government  which  takes,  but  the  value 
to  the  individual  from  whom  the  property  is  taken ;  and  when 
by  the  taking  of  the  tangible  property  the  owner  is  actually 
deprived  of  tlie  franchise  to  collect  tolls,  just  compensation 
requires  payment  not  merely  of  the  value  of  the  tangible 
properly  itself,  but  also  of  that  of  the  franchise  of  which  he 

is  deprived Our  conclusions  are  that  the  navigation 

company  rightfully  placed  this  lock  and  dam  in  the  Monon- 
gahela  River;  that  with  the  ownership  of  the  tangible  prop- 
erty legally  held  in  that  place,  it  has  a  franchise  to  receive 
tolls  for  its  use;  that  such  franchise  was  as  much  a  vested 
right  of  property  as  the  ownership  of  the  tangible  property ; 
that  the  right  of  the  national  government,  under  its  grant  of 
power  to  regulate  commerce  to  condemn  and  appropriate  this 
lock  and  dam  belonging  to  the  navigation  company,  is  sub- 
ject to  the  limitations  imposed  by  the  fifth  amendment ;  that 
private  property  shall  not  be  taken  for  public  uses  without 
just  compensation;  that  just  compensation  requires  payment 
for  the  franchise  to  take  tolls,  as  w-ell  as  for  the  value  of  the 
tangible  property;  and  that  the  assertion  by  Congress  of  its 
purpose  to  take  the  property  does  not  destroy  the  state  fran- 
chise, ' ' 

§  282.  In  Sweet  v.  Rechel,  159  IT.  S.  380,  it  was  held  that  a 
health  act  of  Massachusetts,  authorizing  the  condemnation  of 
lands  by  the  city  of  Boston,  providing  for  compensation  but 
not  requiring  it  to  be  paid  before  the  land  was  taken,  was  valid 
and  constitutional.     Harlan,  J.,  in  the  opinion  said: 

"We  must,  therefore,  assume  that  the  act  of  1867  had  for 
its  real  object  the  protection  of  the  public  health  and  not  the 
mere  acquisition  of  the  property  in  question  for  purposes  of 
sale  or  profit,  after  it  had  increased  in  value  by  reason  of  the 
grade  being  raised.  It  is  not  alleged  in  the  pleadings,  nor 
was  there  any  evidence  tending  to  show,  that  the  cost  of  rais- 
ing the  grade  would  have  been  so  slight,  compared  with  the 
real  value  of  the  property,  that  a  due  regard  to  the  consti- 
tution demanded  that  the  owner  should  have  been  given  op- 
portunity to  raise  the  grade  at  his  own  expense  and  retain 
the  property  in  its  improved  condition.  On  the  contrary,  it 
appeal's  that  the  public  health  justified  prompt  action  and 


§  292  EMINENT    DOMAIN.  236 

the  use  of  such  means  as  could  be  effectively  supplied  only 
by  municipal  authority  acting  under  legislative  sanction. 
....  But  the  validity  of  the  act  of  1867  is  questioned  on 
the  ground' — not  suggested  in  Dingley  v.  Boston — that  it  did 
not  provide  for  compensation  to  be  made  to  the  owners  of  the 
property  in  advance  of  its  actual  appropriation  by  the  com- 
monwealth. 

"Upon  this  point  the  defendant  insists  that  the  statute  was 
enacted  under  the  authority  to  ordain  and  establish  laws  and 
regulations  reasonably  adapted  to  secure  the  good  and  welfare 
of  the  people,  and  that  statutes  having  such  objects  in  view, 
which  deprive  individuals  of  the  control  and  use  of  their 
property,  need  not  make  provision  at  all  for  compensation  to 
such  individuals Undoubtedly,  the  state,  without  tak- 
ing the  title  to  itself,  may  in  some  appropriate  mode,  and 
without  compensation  to  the  owner,  forbid  the  use  of  specified 
private  property  where  such  use  would  be  injurious  to  the 
public  health.  For,  as  said  by  Chief  Justice  Shaw  in  Com- 
monwealth V.  Alger,  7  Cush.  53,  84,  'it  is  a  settled  principle, 
growing  out  of  the  nature  of  well-ordered  civil  society,  that 
every  holder  of  property,  however  absolute  and  unqualified 
may  be  his  title,  holds  it  under  the  implied  liability  that  his 
use  of  it  shall  be  so  regulated  that  it  be  not  injurious  to  the 
equal  enjoyment  of  others  having  an  equal  right  to  the  enjoy- 
ment of  their  property,  nor  injurious  to  the  rights  of  the  com- 
munity.'  'Rights  of  property,  like  all  other  social  and 
conventional  rights,  are  subject  to  such  reasonable  limitations 
in  their  enjoyment  as  shall  prevent  them  from  being  injuri- 
ous, and  to  such  reasonable  restraints  and  regulations  estab- 
lished by  law  as  the  legislature,  under  the  governing  and 
controlling  power  vested  in  them  by  the  constitution,  may 
think  necessary  and  expedient.'  This,  the  court  said,  was 
not  the  power  of  eminent  domain,  but  rather  the  police  power, 
'the  power  vested  in  the  legislature  by  the  constitution  to 
make,  ordain  and  establish  all  manner  of  wholesome  and  rea- 
sonable laws,  statutes  and  ordinances,  either  with  penalties 
or  without,  not  repugnant  to  the  constitution,  as  they  shall 
judge  to  be  for  the  good  and  welfare  of  the  commonwealth 
and  of  the  subjects  of  the  same.'  When,  however,  the  legis- 
lature provides  for  the  actual  taking  and  appropriation  of 
private  property  for  public  uses,  its  authority  to  enact  such 
a  regulation  rests  upon  its  right  of  eminent  domain — a  right 
vital  to  the  existence  and  safety  of  the  government.  But  it 
is  a  condition  precedent  to  the  exercise  of  such  power  that 
the  statute  make  provision  for  reasonable  compensation  to  the 
owner 


237  COMPENSATION.  §  293 

§  293.  "But  must  compensation  be  actually  made  or  ten- 
dered in  advance  of  such  taking  or  appropriation?  Is  it  not 
sufficient,  in  order  to  meet  the  requirements  of  the  constitution, 
if  adequate  provision  be  made  for  compensation?  The  consti- 
tutions of  some  of  the  states  expressly  require  that  compensa- 
tion be  first  made  to  the  owner  before  the  rights  of  the  public 
can  attach.  But  neither  the  constitution  of  Massachusetts  nor 
the  constitution  of  the  United  States  contains  any  such  pro- 
vision. The  former  only  requires  that  the  owner  'shall  re- 
ceive a  reasonable  compensation';  the  latter  that  private 
property  shall  not  be  taken  for  public  use  'without  just  com- 
pensation.' Reasonable  compensation  and  just  compensation 
mean  the  same  thing. 

"In  Haverhill  Bridge  Proprietors  v.  Essex  County  Com- 
missioners, 103  Mass.  120,  124,  the  court  said:  'The  duty  of 
paying  an  adequate  compensation  for  private  property  taken 
is  inseparable  from  the  exercise  of  the  right  of  eminent 
domain.  The  act  granting  the  power  must  provide  for  com- 
pensation and  a  ready  means  of  ascertaining  the  amount. 
Payment  need  not  precede  the  seizure;  but  the  means  for 
securing  indemnity  must  be  such  that  the  owner  will  be  put  to 
no  risk  or  unreasonable  delay. ' 

"A  leading  case  upon  this  point  is  Connecticut  River  Rail- 
road V,  Franklin  County  Commissioners,  127  Mass.  50,  52,  54, 
55,  56.  That  case  arose  under  a  statute  of  Massachusetts 
authorizing  the  manager  of  a  railroad  owned  by  the  common- 
wealth to  take  land  for  a  passenger  station  to  be  used  by 
that  and  other  railroads,  and  providing  no  other  mode  of 
compensation  to  the  owner  than  that  the  land  should  be  paid 
for  out  of  the  earnings  of  the  railroad.  The  statute  was 
held  to  be  void 

"In  view  of  these  authorities,  it  is  clear  that  as  the  con- 
stitution of  Massachusetts  does  not  require  compensation  to 
be  first  actually  made  or  tendered  before  the  rights  of  the 
public  in  the  property  taken  or  applied  become  complete,  the 
requirements  of  that  instrument  are  fully  met  where  the  stat- 
ute makes  such  provision  for  reasonable  compensation  as  will 
be  adequate  and  certain  in  its  results.  It  is  equally  clear  that 
an  adequate  provision  is  made  when  the  statute,  authorizing  a 
public  municipal  corporation  to  take  private  property  for 
public  uses  directs  the  regular  ascertainment,  without  im- 
proper delay  and  in  some  legal  mode,  of  the  damages  sus- 
tained by  the  owner,  and  gives  him  an  unqualified  right  to  a 
judgment  for  the  amount  of  such  damages  which  can  be 
enforced,  that  is  collected  by  judicial  process. 


§§294,295  EMINENT  DOMAIN.  238 

§  294.  "Substantially  the  same  principles  have  been  an- 
nounced by  this  court  when  interpreting  the  clause  of  the  con- 
stitution of  the  United  States  that  forbids  the  taking  of  private 
property  for  public  use  without  just  compensation.  In  Chero- 
kee Nation  v.  Southern  Kansas  Kailway,  135  TJ.  S.  641,  659,  it 
was  suggested  that  the  act  of  Congress  there  involved  vio- 
lated the  constitution  of  the  United  States,  in  that  it  did  not 
provide  for  compensation  to  be  made  to  the  plaintiff  before 
the  defendant  entered  upon  the  lands  taken  for  the  purpose 
of  constructing  its  road  over  them.  This  objection  was  not 
sustained.  The  court  said:  'The  constitution  declares  that 
private  property  shall  not  be  taken  "for  public  use  without 
just  compensation."  It  does  not  provide  or  require  that  com- 
pensation shall  be  actually  paid  in  advance  of  the  occupancy 
of  the  land  to  be  taken.  But  the  owner  is  entitled  to  reason- 
able, certain  and  adequate  provision  before  his  occupancy  is 
disturbed.  Whether  a  particular  provision  be  sufficient  to 
secure  the  compensation  to  which,  under  the  constitution,  he 
is  entitled  is  sometimes  a  question  of  difficulty.  In  the  pres- 
ent case,  the  requirements  of  the  constitution  have,  in  our 
judgment,  been  fully  met.  The  third  section  provides  that 
before  the  railway  shall  be  constructed  through  any  lands  pro- 
posed to  be  taken,  full  compensation  shall  be  made  to  the 
owner  for  all  property  to  be  taken  or  damage  done  by  reason 
of  the  construction  of  the  road.  In  the  event  of  an  appeal 
from  the  finding  of  the  referees,  the  company  is  required  to 
pay  into  court  double  the  amount  of  the  award  to  abide  its 
judgment;  and  that  being  done,  the  company  may  enter  upon 
the  property  sought  to  be  condemned,  and  proceed  with 
the  construction  of  its  road.  We  are  of  the  opinion  that  this 
provision  is  sufficiently  reasonable,  certain  and  adequate  to 
secure  the  just  compensation  to  which  the  owner  is  entitled.* 
....  We  are  of  opinion  that,  upon  both  principle  and  au- 
thority, it  was  competent  for  the  legislature,  in  the  exercise 
of  the  police  powers  of  the  commonwealth,  and  of  its  power 
to  appropriate  private  property  for  public  uses,  to  authorize 
the  city  to  take  the  fee  in  the  lands  described  in  the  statute 
prior  to  making  compensation,  and  that  the  provision  made 
for  compensating  the  owner  was  certain  and  adequate." 

§  295.  In  Kennedy  v.  Indianapolis,  103  U.  S.  599,  it  was 
held  that  where  land  was  appropriated  for  a  canal,  while  the 
right  to  enter  and  use  the  property  was  complete  as  soon  as 
it  was  appropriated,  the  title  did  not  pass  until  just  com- 
pensation was  made.     Waite,  C.  J.,  said: 


230  ■  CO-MPENSATION.  §  295 

"The  constitution  of  the  state  (Indiana)  adopted  in  1816, 
which  was  in  force  M'hen  this  act  was  passed,  and  until  all 
the  rights  of  the  state  under  it  had  been  acquired,  contains 
the  following  as  article  I,  section  7:  'That  no  man's  par- 
ticular services  shall  be'  demanded,  or  property  taken  or  ap- 
plied to  public  use,  without  the  consent  of  his  representatives, 
or  without  a  just  compensation  being  made  therefor.'  .  .  .  . 
Not  to  multiply  cases  further,  it  seems  to  us  that  both  on' 
principle  and  authority  the  rule  is,  under  such  a  constitution 
as  that  of  Indiana,  that  the  right  to  enter  on  and  use  the 
property  is  complete  as  soon  as  the  property  is  actuallj'-  ap- 
propriated under  the  authority  of  the  law  for  a  public  use, 
but  that  the  title  does  not  pass  from  the  owner  without  his 
consent  until  just  compensation  has  been  made  to  him. 

"We  proceed  now  to  apply  this  rule  to  the  facts.  It  is  not 
contended  that  compensation  in  money  was  made  for  any 
of  the  land  in  dispute.  Van  Blaricum  claimed  money,  but 
the  tribunal  to  which,  under  the  statute,  his  application  was 
referred,  decided  against  him.  In  effect  he  was  told,  in  an- 
swer to  his  application,  that  the  benefits  he  would  receive 
from  the  construction  of  the  canal  would  be  'just  compensa- 
tion' to  him  for  his  property  taken.  The  town  and  the  lot 
owners  adjoining  Missouri  Street  made  no  claim  for  compen- 
sation. Neither  did  Coe,  the  owner  of  lot  126.  In  this  way 
these  parties  signified,  under  the  law,  their  willingne;-'s  to 
take  as  their  compensation  the  benefits  which  would  result 
to  them  respectively  from  the  construction  of  the  canal.  The 
appropriation  was  for  public  use  by  means  of  a  canal,  and 
the  owners  were  to  be  paid  their  compensation  for  the  land 
taken  by  the  construction  of  a  canal  thereon.  It  would  seem 
to  follow  that  if  the  canal  was  constructed,  the  compensation 
which  the  constitution  guaranteed  the  owner  would  be  made ; 
otherwise  not.  If  the  canal  was  in  law  built,  therefore,  the 
title  passed  to  the  state ;  if  not,  it  remained  in  the  owner. 
The  failure  to  claim  damages  within  the  two  years  was  no 
more  than  a  waiver  of  all  compensation  except  such  as  grew 
out  of  the  benefits  resulting  from  the  construction  of  the  work 
for  which  the  appropriation  was  made.  To  hold  that  the 
title  passed  by  mere  appropriation,  if  no  claim  for  damages 
was  made  within  the  two  years,  would  be  in  ef¥ect  to  decide 
that  if  the  state  entered  on  land  for  a  particular  use  and 
kept  possession  as  against  the  owner  for  two  years,  it  got  a 
title  in  fee  whether  the  property  was  actually  put  to  the  use 
or  not.     Such  we  cannot  believe  to  be  the  law." 


§§300,301  EMINENT   DOMAIN.  '  240 


CHAPTER  XY. 

PROCEDURE. 

§  300.  No  special  form  of  procedure  for  the  condemnation 
of  land  and  the  determination  of  the  compensati-on  to  be  made, 
except  that  there  must  be  a  judicial  determination  of  the  mat- 
ters involved,  with  an  opportunity  given  to  the  parties,  is 
required  by  the  federal  constitution.  Except  as  required  by 
the  constitution  of  the  state  involved  in  the  particular  case, 
a  legislative  provision  authorizing  land  to  be  condemned  for 
certain  purposes  and  the  compensation  to  be  assessed  by 
commissioners  is  valid.  Nor  is  it  necessary  that  the  owner 
have  actual  notice  of  the  proceedings,  provided  the  proceeding 
is  a  judicial  one  upon  such  notice  as  may  be  reasonably  given. 
A  published  notice,  e.  g.,  is  sufficient  notice  to  a  nonresident 
owner,  who  must  therefore  at  his  peril  ascertain  any  con- 
demnation proceedings  pending  against  his  property. 

So,  too,  the  method  of  determining  the  compensation  is 
discretionary  with  the  legislature,  and  a  jury  trial  is  not  a 
matter  of  right  unless  especially  required  by  the  state  con- 
stitution. 

"While  the  proceedings  until  the  compensation  is  actually 
ascertained  and  paid  are  in  the  control  of  the  state  and  its 
court,  yet  when  once  title  has  passed  upon  the  payment  of 
compensation,  the  matter  becomes  res  adjudicata  and  may  not 
be  reopened.  Nor  upon  appeal  will  the  appellate  court  re- 
vise the  amount  of  compensation  awarded,  for  the  reason 
that  the  appellate  court  has  not  and  cannot  have  before  it 
the  data  and  real  evidence  upon  which  the  discretionary 
tribunal  made  its  finding. 

§  301.  In  Shoemaker  v.  United  States,  147  U.  S.  282,  it  was 
held  the  appellate  court  would  not  interfere  with  commis- 
sioners as  to  their  findings,  and  that  the  claimant  was  not  en- 
titled to  interest  from  the  time  of  the  initiation  of  the  proceed- 
ings.    Shiras,  J.,  in  the  opinion  of  the  court,  said: 


241  '      PROCEDURE.  §  302 

"The  theory  of  appraisement  asked  for  by  the  plaintiffs 
in  error  difCered  from  the  one  adopted  by  the  court  chiefly  in 
two  particulars:  first,  it  treats  the  case  as  if  it  were  one 
before  an  ordinary  jury,  whose  action  is  determined  by  the 
evidence  adduced;  and  second,  that  the  evidence  might  have 
reference  to  and  include  any  supposed  or  speculative  value 
given  to  the  property  taken  by  reason  of  the  act  of  Congress 
creating  the  park  project;  whereas  the  court  regarded  the 
functions  of  the  appraisers  as  including  their  own  judgment 
and  inspection  of  the  lands  taken  as  well  as  a  consideration 
of  the  evidence  adduced  by  the  parties. 

"We  approve  of  the  instructions  given  by  the  court  in  both 
particulars.  The  scope  of  action  of  the  board  of  commis- 
sioners was  plainly,  by  the  terms  of  the  act  and  the  nature 
of  the  inquiry,  not  restricted  to  a  mere  consideration  of  the 
evidence  and  allegations  of  the  parties,  but  included  the  exer- 
cise of  those  powers  of  judgment  and  observation  which  led 
to  their  selection  as  fit  persons  for  such  a  position. 

"While  the  board  should  be  allowed  a  wide  field  in  which 
to  extend  their  investigation,  yet  it  has  never  been  held  that 
they  can  go  outside  of  the  immediate  duty  before  them,  viz., 
to  appraise  the  tracts  of  land  proposed  to  be  taken,  by  re- 
ceiving evidence  of  conjectural  or  speculative  values,  based 
upon  the  anticipated  effect  of  the  proceedings  under  which 
the  condemnation  is  had.  Kerr  v.  South  Park  Commission- 
ers, 117  U.  S.  379,  380. 

§  302.  "In  connection  with  this  part  of  the  subject,  we  may 
appropriately  consider  the  objection  made  to  the  action  of  the 
court  below  in  declining  to  review  and  pass  upon  the  evidence 
that  had  been  produced  before  the  commissioners. 

"If,  as  we  have  said,  the  court  below  was  right  in  refusing 
to  restrict  the  commissioners  to  a  mere  consideration  of  the 
evidence  adduced,  then  it  would  seem  to  follow  that  the 
court  could  not  be  legitimately  asked,  in  the  absence  of  any 
exceptions  based  upon  charges  of  fraud,  corruption  or  plain 
mistake  on  the  part  of  the  appraisers,  to  go  into  a  considera- 
tion of  the  evidence.  The  court  cannot  bring  into  review  be- 
fore it  the  various  sources  and  grounds  of  judgment  upon 
which  the  appraisers  have  proceeded.  The  attempt  to  do  so 
would  transfer  the  function  of  finding  the  values  of  the  lands 
from  the  appraisers  to  the  court.  Such  a  course  would  have 
presented  a  much  more  serious  allegation  of  error  than  we 
find  in  the  objection  as  made. 

"The  rule  on  this  subject  is  so  well  settled  that  we  shall 
content  ourselves  with  repeating  an  apt  quotation  from  Mills 
16 


§  303  EMINENT   DOMAIN.  242 

on  Eminent  Domain,  246,  made  in  the  opinion  of  the  court 
below:  'An  appellate  eourt  will  not  interfere  with  the  report 
of  commissioners  to  correct  the  amount  of  damages  except 
in  cases  of  gross  error  showing  prejudice  or  corruption.  The 
commissioners  hear  the  evidence  and  frequently  make  their 
principal  evidence  out  of  a  view  of  the  premises,  and  this  evi- 
dence cannot  be  carried  up  so  as  to  correct  the  report  as 
being  against  the  weight  of  evidence.  Hence,  for  an  error 
in  the  judgment  of  commissioners  in  arriving  at  the  amount 
of  damages  there  can  be  no  correction,  especially  where  the 
evidence  is  conflicting.  Commissioners  are  not  bound  by  the 
opinions  of  experts  or  by  the  apparent  weight  of  evidence, 
but  may  give  their  own  conclusions.'  .... 

§  303.  "The  fourteenth  assignment  charges  the  court  -unth 
error  in  refusing  to  allow  interest  on  the  amounts  assessed  as 
the  values  for  lands  selected  for  the  Rock  Creek  Park.  The  ar- 
gument shows  that  the  interest  claimed  was  for  the  time  that 
elapsed  between  the  initiation  of  the  proceedings  and  the 
payment  of  the  money  into  court.  The  vice  of  this  contention 
is  in  the  assumption  that  the  lands  were  actually  condemned 
and  withdrawn  from  the  possession  of  their  owners  by  the 
mere  filing  of  the  map.  Interest  accrues  either  by  agreement 
of  the  debtor  to  allow  it  for  the  use  of  money  or  in  the  nature 
of  damages,  by  reason  of  the  failure  of  the  debtor  to  pay 
the  principal  when  due.  Of  course,  neither  ground  for  such 
a  demand  can  be  found  in  the  present  case.  No  agreement 
to  pay  the  interest  demanded  is  pointed  to,  and  no  failure  to 
pay  the  amount  assessed  took  place.  That  amount  was  not 
fixed  and  ascertained  till  the  confirmation  of  the  report. 
Then  some  of  those  entitled  to  the  assessments  accepted  their 
money,  the  plaintiffs  in  error  declined  to  accept,  and  the 
amounts  assessed  in  their  favor  were  paid  into  court,  which 
must  be  deemed  equivalent  to  payment. 

"It  is  true  that,  by  the  institution  of  proceedings  to  con- 
demn the  possession  and  enjoyment  by  the  owner  are  to  some 
extent  interfered  with.  He  can  put  no  permanent  improve- 
ments on  the  land,  nor  sell  it  except  subject  to  the  condemna- 
tion proceedings.  But  the  owner  was  in  receipt  of  the  rents, 
issues  and  profits  during  the  time  occupied  in  fixing  the 
amount  to  which  he  was  entitled,  and  the  inconveniences  to 
which  he  was  subjected  by  the  delay  are  presumed  to  be  con- 
sidered and  allowed  for  in  fixing  the  amount  of  compensation. 
Such  is  the  rule  laid  down  in  cases  of  the  highest  authority. 
Reid  V.  Hanover  Branch  Railroad,  105  Mass.  303;  Kidder  v. 
Oxford,  116  Mass.   165;  Hamersley  v.  New  York  City,   56 


243  PROCEDURE.  §  304 

N.  Y.  533;  Norris  v.  Philadelphia,  70  Penn.  St.  332;  Chicago 
V.  Palmer,  93  Illinois,  125;  Phillips  v.  South  Park  Commis- 
sion, 119  Illinois,  626." 

§  304.  In  Secombe  v.  Railroad  Company,  23  "Wall.  108,  in 
holding  that  the  title  of  a  railroad  company  to  lands  con- 
demned in  compliance  with  a  legislative  act  could  not  be  ques- 
tioned collaterally,  Davis,  J.,  said : 

"Whether  the  Minnesota  Central  Railroad  Company,  under 
whom  the  defendant  claims — and  which  occupied  for  railroad 
purposes  the  land  in  question  long  before  the  deeds  of  quit- 
claim under  which  the  plaintiff  sets  up  title  were  made — 
whether  this  company  had  the  right  to  condemn  the  land  and 
took  the  proper  steps  to  condemn  it,  depends,  of  necessity, 
on  the  laws  of  the  state ;  and  if  these  laws  have  been  construed 
by  the  highest  court  of  the  state  in  a  case  similar  to  the  one 
before  us,  the  federal  courts  are  relieved  of  all  difficulty. 

"We  do  not  feel  called  upon  to  enter  into  an  examination 
of  the  several  acts  on  this  subject,  both  public  and  private, 
which  are  quite  numerous,  in  order  to  show  that  the  Minne- 
sota Central  Company  had  a  corporate  existence,  and  was 
therefore  capable  of  performing  an  act  of  condemnation.  It 
is  enough  to  say  that  the  point  is  settled  in  favor  of  the 
company  by  the  decision  and  reasoning  of  the  supreme  court 
of  Minnesota  in  St.  Paul  and  Pacific  Railroad  Company  v. 
Parcher  (14  Minn.  297). 

"The  Minnesota  Central. Company  was  authorized  by  law 
to  procure  the  condemnation  of  land  for  the  use  of  its  road, 
and  from  the  findings  of  fact  by  the  circuit  court  it  suffi- 
ciently appears  that  the  statutory  provisions  on  the  subject 
were  observed. 

"It  is  no  longer  an  open  question  in  this  country  that  the 
mode  of  exercising  the  right  of  eminent  domain,  in  the  ab- 
sence of  any  provision  in  the  organic  law  prescribing  a  con- 
trary course,  is  within  the  discretion  of  the  legislature. 
There  is  no  limitation  upon  the  power  of  the  legislature  in 
this  respect,  if  the  purpose  be  a  public  one,  and  just  com- 
pensation be  paid  or  tendered  to  the  owner  for  the  property 
taken.  This  general  rule  has  received  the  sanction  of  the 
supreme  court  of  Minnesota  in  analogous  cases  to  the  one 
at  bar.  It  hardly  need  be  said  that  the  taking  of  private 
property  in  order  that  a  railroad  may  be  constructed  is  a 
public  necessity.  It  is  urged  that  the  property  in  controversy 
was  occupied  before  the  proceedings  in  condemnation  were 
begun,  but  there  is  nothing  in  the  findings  of  fact  to  show 


§§  305,  306  EMINENT   DOMAIN.  244 

that  this  was  so.  Even  if  the  plaintiff  were  in  a  situation 
to  make  the  objection,  it  would  not  avail  him,  for  prior  occu- 
pation without  authority  of  law  would  not  preclude  the  com- 
pany from  taking  subsequent  measures  authorized  by  law 
to  condemn  the  land  for  their  use.  If  the  company  occupied 
the  land  before  condemnation  without  the  consent  of  the 
owners,  and  without  any  law  authorizing  it,  they  are  liable 
in  trespass  to  the  persons  who  owned  the  land  at  the  time, 
but  not  to  the  present  plaintiff. 

§  305.  "It  is  urged,  also,  against  the  validity  of  the  award 
of  the  commissioners  that  it  was  not  made  in  reasonable  time, 
or  the  amount  of  it  ever  paid  or  tendered  to  the  parties  in  in- 
terest. Whether  this  be  so  or  not  does  not  concern  the  plain- 
tiff. It  is  enough  for  him  to  know  that  a  judgment  was  en- 
tered confirming  the  award,  and  the  money  paid  into  the 
court  for  the  use  of  Pinney  and  Osborne,  and  is  there  now, 
unless  they  have  seen  fit  to  withdraw  it.  It  is  a  fair  pre- 
sumption, as  both  these  persons  had  notice,  actual  or  con- 
structive, of  the  proceedings  in  condemnation  and  took  no 
steps  to  review  them,  that  they  were  either  satisfied  with  the 
award  or  concluded  they  could  not  make  successful  opposition 
to  it. 

"This  suit  is  an  effort  to  question  the  propriety  of  the 
condemnation  and  sale  of  the  property  in  a  collateral  pro- 
ceeding, not  by  the  party  even  whose  land  was  appropriated, 
but  by  a  stranger  to  the  original  proceeding,  who,  whatever 
his  motive  in  buying,  got  no  other  estate  than  the  original 
owners  could  convey — a  fee  subject  to  the  easement  of  the  rail- 
road company.  The  judgment  of  condemnation  in  this  case 
was  rendered  by  a  competent  court  charged  with  a  special  statu- 
tory jurisdiction,  and  all  the  facts  necessary  to  the  exercise  of 
this  jurisdiction  are  shown  to  exist.  A  judgment  thus  ob- 
tained is  no  more  subject  to  impeachment  in  a  collateral  pro- 
ceeding than  the  judgment  of  any  other  court  of  exclusive 
jurisdiction.  If  it  were  so,  railroad  companies  would  have 
no  assurance  that  the  steps  taken  by  them  to  procure  the 
right  of  way  would  conclude  anyone,  and  they  would  be  con- 
stantly subject  to  vexatious  litigation." 

§  306.  In  Huling  v.  Kaw  Valley  Railway,  130  U.  S.  559,  it 
was  held  that  in  a  condemnation  proceeding  under  a  state  stat- 
ute publication  of  notice  as  required  by  the  statute  was  suffi- 
cient notice  to  a  nonresident  o^vner,  and,  secondly,  the  fact  that 
one  of  the  commissioners  appointed  to  fix  the  value  and  com- 


245  PROCEDURE.  §  306 

pensation  was  not  a  freeholder,  as  required  by  the  statute, 
could  not  be  taken  advantage  of  subsequent  to  the  proceed- 
ings in  a  collateral  action  of  trespass.  Miller,  J.,  in  the 
opinion  of  the  court,  said: 

"The  transcript  on  its  face  seems  to  be  regular  in  every 
particular,  showing  a  full  compliance  with  all  the  require- 
ments of  the  statute  on  the  subject.  There  was  proper  pub- 
lication made  in  the  newspaper,  and,  indeed,  so  far  as  the 
face  of  the  record  is  concerned,  no  objection  seems  to  be  made 
to  it,  except  that  it  is  very  urgently  argued  that  the  notice 
published  was  not  sufficient,  because  it  did  not  apprise  the 
party  of  what  land  was  to  be  taken ;  and  if  in  that  respect 
it  was  a  sufficient  compliance  with  the  statute,  it  is  then 
insisted  that  the  statute  itself  was  void  as  authorizing  the 
taking  of  private  property  without  due  process  of  law. 

"In  regard  to  this  objection  we  do  not  see  how  the  notice 
is  deficient,  if  any  notice  short  of  one  actually  served  upon 
the  party  can  be  sufficient.  With  regard  to  the  description 
of  the  property,  the  notice  gives  all  that  could  be  known  at 
the  time  it  was  published.  As  the  commissioners  had  the 
power  to  determine  the  precise  location  of  the  road,  that  loca- 
tion could  not  be  described  with  more  precision  than  it  is 
in  the  newspaper  publication  set  out  in  the  proceedings.  It 
is  directed  to  all  pensons  o\\Tiing  lands  on  the  line  of  the 
railroad  as  the  same  is  now  or  may  be  located  through  section 
23,  township  11,  range  25,  in  the  county  of  Wyandotte  and 
state  of  Kansas;  and  it  notified  persons  owning  land  in  that 
section  that  the  commissioners  duly  appointed  would,  on 
Monday,  the  22d  of  May,  1882,  proceed  to  lay  off  the  route 
for  said'  road  through  said  section,  and  appraise  the  value 
and  assess  the  damages  to  each  quarter  section  through  and 
over  which  the  railroad  might  be  located.  To  the  plaintiffs 
in  this  case,  who  are  the  owners  of  a  quarter  section  of  land 
in  section  23  of  that  to\^^lship,  this  was  a  sufficient  warning 
that  the  road  might  run  through  their  land  at  that  point, 
and  sufficient  notice  of  the  time  and  place  where  this  matter 
would  be  determined,  as  also  the  amount  to  which  they  would 
be  entitled  for  the  appropriation  of  their  land.  If  this  notice 
had  been  read  by  the  plaintiffs,  it  was  a  clear  and  distinct 
notification  to  them  that  it  would  be  determined  at  that  time 
whether  any,  and  how  much,  of  their  land  in  section  23  would 
be  taken  for  the  railroad,  and  the  value  to  be  set  upon  it  by 
the  commissioners;  and  we  think  that  this  was  all  the  notice 
they  had  a  right  to  require.  Of  course  the  statute  goes  upon 
the  presumption  that,  since  all  the  parties  cannot  be  served 


§§  307,  308  EMINENT   DOMAIN.  246 

personally  with  such  notice,  the  publication,  which  is  designed 
to  meet  the  eyes  of  everybody,  is  to  stand  for  such  notice. 
The  publication  itself  is  sufficient  if  it  had  been  in  the  form 
of  a  personal  service  upon  the  party  himself  within  the 
county.  Nor  have  we  any  doubt  that  this  form  of  warning 
owners  of  property  to  appear  and  defend  their  interests, 
where  it  is  subject  to  demands  for  public  use  when  authorized 
by  statute,  is  sufficient  to  subject  the  property  to  the  action 
of  the  tribunals  appointed  by  proper  authority  to  determine 
those  matters. 

§  307.  * '  The  owner  of  real  estate,  who  is  a  nonresident  of  the 
state  within  which  the  property  lies,  cannot  evade  the  duties 
and  obligations  which  the  law  imposes  upon  him  in  regard  to 
such  property,  by  his  absence  from  the  state.  Because  he 
cannot  be  reached  by  some  process  of  the  courts  of  the  state, 
which,  of  course,  have  no  efficacy  beyond  their  own  borders, 
he  cannot,  therefore,  hold  his  property  exempt  from  the  lia- 
bilities, duties  and  obligations  which  the  state  has  a  right 
to  impose  upon  such  property;  and  in  such  cases  some  sub- 
stituted form  of  notice  has  always  been  held  to  be  a  sufficient 
warning  to  the  owner  of  the  proceedings  which  are  being 
taken  under  the  authority  of  the  state  to  subject  his  property 
to  those  demands  and  obligations.  Otherwise  the  burdens  of 
taxation,  and  the  liability  of  such  property  to  be  taken  under 
the  power  of  eminent  domain,  would  be  useless  in  regard  to  a 
very  large  amount  of  property  in  every  state  of  the  Union. 

"It  is  therefore  the  duty  of  the  owner  of  real  estate  who 
is  a  nonresident,  to  take  measures  that  in  some  way  he  shall 
be  represented  when  his  property  is  called  into  requisition; 
and  if  he  fails  to  do  this,  and  fails  to  get  notice  by  the 
ordinary  publications  which  have  usually  been  required  in 
such  cases,  it  is  his  misfortune,  and  he  must  abide  the  conse- 
quences. Such  publication  is  'due  process  of  law'  as  applied 
to  this  class  of  cases.  Harvey  v.  Tyler,  2  Wall.  328 ;  Secombe 
V.  Railroad  Co.,  23  Wall.  108;  Pennoyer  v.  Neff,  95  U.  S. 
714,  722,  743,  744;  Hagar  v.  Reclamation  District,  111  U.  S. 
70l';  McMillen  v.  Anderson.  95  U.  S.  37;  Davidson  v.  New 
Orleans,  96  U.  S.  97,  105;  Boom  Co.  v.  Patterson,  98  U.  S. 
403,  406. 

§  308.  "Conceding  that  these  proceedings  subjected  the  land 
in  controversy  to  the  jurisdiction  of  the  commissioners  ap- 
pointed by  the  district  judge  of  Wyandotte  County,  the  ques- 
tion as  to  whether  one  of  those  commissioners  was  a  freeholder 
or  not  is  not  open  to  consideration  in  this  suit.    The  commission- 


247  PROCEDURE.  §  309 

ers  were  regularly  appointed  by  the  proper  officer,  and  took 
the  proper  oath,  and  have  discharged  their  duties  in  the 
nisnner  required  by  law.  The  railroad  company  has  paid 
the  money  and  taken  possession  of  the  land  which  was  con- 
demned by  those  commissioners.  The  plaintiffs  cannot  re- 
cover in  the  present  action  without  a  holding  in  this  collateral 
proceeding  that  all  that  was  done  by  those  commissioners  is 
void  by  reason  of  this  want  of  qualification  in  one  of  their 
number.  The  proper  time  for  these  plaintiffs  to  have  taken 
their  objection  to  Mr.  Wood,  as  a  commissioner,  was  either 
at  the  time  of  his  appointment  or  at  the  time  he  proceeded 
to  act  as  commissioner.  If  it  be  ob.jected  that  they  could  not 
be  supposed  to  have  any  notice  of  the  application  for  the 
appointment  of  these  commissioners  and  of  the  time  and  place 
when  the  judge  would  act  on  that  application,  the  law  pre- 
sumes that  they  had  notice,  and  might  have  attended  at  the 
time  the  commissioners  entered  upon  their  duties.  If  this 
objection  had  been  then  taken  it  might  have  been  sustained, 
or  it  could  have  been  taken  by  way  of  appeal  from  the 
proceedings  of  the  commissioners;  but  to  permit  such  an  ob- 
jection as  this  to  prevail  at  this  time,  and  thus  defeat  the 
whole  of  the  proceedings  upon  this  narrow  ground,  is  a  prop- 
osition unsupported  by  sound  principle  or  by  authority.  It 
is  a  collateral  attack  upon  a  proceeding  which  has  been 
completed  according  to  the  forms  of  law.  There  is  no  more 
reason  why  this  want  of  qualification  should,  when  shown  at 
this  stage  of  the  proceeding,  invalidate  it  all,  than  there  is 
why  the  discovery,  after  a  judgment  and  after  that  judgment 
has  passed  beyond  the  control  of  the  court,  that  one  of  the 
jurors  was  disqualified  should  make  absolutely  void  the  ver- 
dict and  judgment.  It  is  only  one  of  those  cases  frequently 
occurring  in  the  administration  of  the  law,  in  which  it  is 
better  that  errors  not  pointed  out  at  the  proper  time  should 
be  disregarded  than  that  by  attempts  to  correct  them  evils 
much  worse  should  follow  than  those  incident  to  the  error. 
Commrs.  of  Leavenworth  Co.  v.  Espen,  12  Kansas,  531 ; 
Veuard  v.  Cross,  8  Kansas,  248 ;  Cooper  v.  Reynolds,  10  Wall. 
308;  Voorhees  v.  Bank  of  the  United  States,  10  Pet.  449." 

§  309.  In  United  States  v.  Jones,  109  U.  S.  513,  it  was  held 
that  the  liability  to  make  compensation  for  property  taken  for 
public  uses  under  eminent  domain  is  a  limitation  of  the  right 
of  eminent  domain  which  is  incident  to  sovereignty,  and  the 
determination  of  the  compensation  may  be  delegated  by  the 


§  310  EMINENT   DOMAIN.  248 

United  States  government  to  any  tribunal,  state  or  special. 
Field,  J.,  said: 

"The  power  to  take  private  property  for  public  uses,  gen- 
erally termed  the  right  of  eminent  domain,  belongs  to  every 
independent  government.  It  is  an  incident  of  sovereignty, 
and  as  said  in  Boone  v.  Patterson,  98  U.  S.  106,  requires  no 
constitutional  recognition.  The  provision  found  in  the  fifth 
amendment  to  the  federal  constitution,  and  in  the  constitutions 
of  the  several  states,  for  just  compensation  for  the  property 
taken  is  merely  a  limitation  upon  the  use  of  the  power.  _  It 
is  no  part  of  the  power  itself,  but  a  condition  upon  which 
the  power  may  be  exercised.  It  is  undoubtedly  true  that  the 
power  of  appropriating  private  property  to  public  uses  vested 
in  the  general  government — its  right  of  eminent  domain, 
which  Vattel  defines  to  be  the  right  of  disposing,  in  case  of 
necessity  and  for  the  public  safety,  of  all  the  wealth  of  the 
country — cannot  be  transferred  to  a  state  any  more  than 
its  other  sovereign  attributes;  and  that,  when  the  use  to 
which  the  property  taken  is  applied  is  public,  the  propriety 
or  expediency  of  the  appropriation  cannot  be  called  in  ques- 
tion by  any  other  authority.  But  there  is  no  reason  why 
the  compensation  to  be  made  may  not  be  ascertained  by  any 
appropriate  tribunal  capable  of  estimating  the  value  of  the 
property.  There  is  nothing  in  the  nature  of  the  matter  to 
be  determined  which  calls  for  the  establishment  of  any  special 
tribunal  by  the  appropriating  power. 

§  310.  "The  proceeding  for  the  ascertainment  of  the  value 
of  the  property  and  consequent  compensation  to  be  made  is 
merely  an  inquisition  to  establish  a  particular  fact  as  a  prelim- 
inary to  the  actual  taking;  and  it  may  be  prosecuted  before 
commissioners  or  special  boards  or  the  courts,  with  or  without 
the  intervention  of  a  jury,  as  the  legislative  power  may  desig- 
nate. All  that  is  required  is  that  it  shall  be  conducted  in 
some  fair  and  just  manner,  with  opportunity  to  the  owners 
of  the  property  to  present  evidence  as  to  its  value  and  to  be 
heard  thereon.  Whether  the  tribunal  shall  be  created  directly 
by  an  act  of  Congress  or  one  already  established  by  the  states 
shall  be  adopted  for  the  occasion  is  a  mere  matter  of  legis- 
lative discretion.  Undoubtedly  it  was  the  purpose  of  the 
constitution  to  establish  a  general  government  independent 
of,  and  in  some  respects  superior  to,  that  of  the  state  govern- 
ments— one  which  could  enforce  its  own  laws  through  its  own 
officers  and  tribunals;  and  this  purpose  was  accomplished. 
That  government  can  create  all  the  officers  and  tribunals  re- 


249  PROCEDURE.  §  311 

quired  for  the  execution  of  its  powers.  Upon  this  point  there 
can  be  no  question.  Kohl  v.  United  States,  91  U.  S.  367. 
Yet  from  the  time  of  its  establishment  that  government  has 
been  in  the  habit  of  using,  with  the  consent  of  the  states, 
their  officers,  tribunals  and  institutions  as  its  agents.  Their 
use  has  not  been  deemed  violative  of  any  principle  or  as  in 
any  manner  derogating  from  the  sovereign  authority  of  the 
federal  government;  but  as  a  matter  of  convenience  and  as 
tending  to  a  great  saving  of  expense." 

§  311.  In  Garrison  v.  City  of  New  York,  21  Wall.  (88 
U.  S.)  196,  in  holding  that  an  award  in  condemnation  proceed- 
ings could  be  vacated  at  any  time  before  payment  when  title 
passed,  that  the  award  was  not  a  contract,  and  that  a  statute 
authorizing  its  vacation  was  not  unconstitutional,  Field,  J., 
said: 

"In  the  proceeding  to  condemn  the  property  of  the  plain- 
tiff for  a  public  street  there  was  nothing  in  the  nature  of 
a  contract  between  him  and  the  city.  The  state,  in  virtue 
of  her  right  of  eminent  domain,  had  authorized  the  city 
to  take  his  property  for  a  public  purpose,  upon  making  to 
him  just  compensation.  All  that  the  constitution  or  justice 
required  was  that  a  just  compensation  should  be  made  to  him, 
and  his  property  would  then  be  taken  whether  or  not  he  as- 
sented to  the  measure.  The  proceeding  to  ascertain  the 
benefits  or  losses  which  will  accrue  to  the  owner  of  property 
when  taken  for  public  use,  and  thus  the  compensation  to  be 
made  to  him,  is  in  the  nature  of  an  inquest  on  the  part  of  the 
state,  and  is  necessarily  under  her  control.  It  is  her  duty 
to  see  that  the  estimates  made  are  just,  not  merely  to  the 
individual  whose  property  is  taken,  but  to  the  public  which 
is  to  pay  for  it.  And  she  can  to  that  end  vacate  or  authorize 
the  vacation  of  any  inquest  taken  by  her  direction  to  ascer- 
tain particular  facts  for  her  guidance,  where  the  proceeding 
has  been  irregularly  or  fraudulently  conducted,  or  in  which 
error  has  intervened,  and  order  a  new  inquest,  provided  such 
methods  of  procedure  be  observed  as  will  secure  a  fair  hear- 
ing from  the  parties  interested  in  the  property.  Nor  do  we 
perceive  how  this  power  of  the  state  can  be  affected  by  the 
fact  that  she  makes  the  finding  of  the  commissioners  upon 
the  inquest  subject  to  the  approval  of  one  of  her  courts. 
That  is  but  one  of  the  modes  which  she  may  adopt  to  prevent 
error  and  imposition  in  the  proceedings.  There  is  certainly 
nothing  in  the  fact  that  an  appeal  is  not  allowed  from  the 
action  of  the  court  in  such  cases,  which  precludes  a  resort 


§  311  EMINENT   DOMAIN.  250 

to  other  methods  for  the  correction  of  the  finding  where  irreg- 
ularity, mistake  or  fraud  has  intervened.    • 

"Until  the  property  is  actually  taken  and  the  compensation 
is  made  as  provided,  the  power  of  the  state  over  the  matter 
is  not  ended.  Any  declaration  in  the  statute  that  the  title 
will  vest  at  a  particular  time  must  be  construed  in  subordina- 
tion to  the  constitution,  which  requires,  except  in  cases  of 
emergency  admitting  of  no  delay,  the  payment  of  the  com- 
pensation or  provision  for  its  payment,  to  precede  the  taking 
or,  at  least,  to  be  concurrent  with  it." 


EXISTING  COEPOEATION  LAWS 


OF  THE 


STATE  OF  WiSHINGTOI 


RELATING    TO 

THE  ORGANIZATION  AND  REGULATION  OF  CORPO- 
RATIONS AND  DEFINING  THEIR  POWERS 
AND  PRIVILEGES 

INCLUDING 

LAWS  RELATING   TO   THE   ADMISSION   OF  FOREIGN   CORPO- 
EATIONS  DESIRING  TO  DO  BUSINESS  IN  THE  STATE 


EXISTING  CORPORATION  LAWS,  1913 


FORMATION  OF  GENERALLY 

§  401.    How  Organized — Conditions  and  Liabilities. 

[§  3677,  Rem.-Bal.]  Corporations  for  manufacturing, 
mining,  milling,  wharfing  and  docking,  mechanical,  banking, 
mercantile,  improvement  and  building  purposes,  or  for  the 
building,  equipping  and  managing  water  flumes  for  the  trans- 
portation of  wood  and  lumber,  or  for  the  purpose  of  building, 
equipping  and  running  railroads,  or  constructing  canals  or 
irrigation  canals,  or  engaging  in  any  other  species  of  trade 
or  business,  may  be  formed  according  to  the  provisions  of  this 
chapter;  such  corporations  and  the  members  thereof  being 
subject  to  all  the  conditions  and  liabilities  herein  imposed,  and 
to  none  others :  Provided,  that  no  such  corporation  shall  com- 
mence business  or  institute  proceedings  to  condemn  land  for 
corporate  purposes  until  the  whole  amount  of  its  capital  stock 
has  been  subscribed:  And  provided  further,  that  the  pro- 
visions of  the  foregoing  proviso  shall  not  apply  to  corporations 
engaged  exclusively  in  loaning  money  on  real  estate,  nor  to 
corporations  engaged  exclusively  in  raising  money  from,  and 
loaning,  or  repaying  it  to,  their  own  members,  and  which  con- 
fine their  loaning  and  business  operations  wholly  to  the  coun- 
ties of  their  principal  place  of  business,  respectively,  and  to 
the  counties  adjacent  and  adjoining  thereto.  [Laws  1895, 
§  1,  p.  338;  Cd.  1881,  §  2421;  1  H.  C,  §  1497;  Bal.,  §  4250.] 

Loaning  money  on  real  estate  excepted  from  statutory  restriction 
on  doing  business  before  whole  amount  of  capital  stock  subscribed. 
(Brown  v.  Elwell,  17  Wash.  442,  4&  Pac.  1068.) 

The  fact  that  the  corporation  has  not  complied  with  the  statutory 
requirement  that  entire  stock  be  subscribed  before  doing  business  can- 
not be  raised  to  the  injury  of  third  parties.  (Spokane  v.  Amsterdamsoh 
Trustees  Kantoor,  22  Wash.  172,  6t)  Pac.  141.) 

(253) 


§  401  EXISTING    CORPORATION   LAWS,    1913.  254 

Subscribers  to  stock  of  company,  which  has  begun  business  before 
all  its  stock  is  subscribed,  are  not  liable  on  the  subscriptions  unless  they 
have  by  their  acts  and  conduct  waived  the  conditions.  Part  payment 
of  subscriptions  without  notice  not  a  waiver.  (Birge  v.  Browning, 
11  Wash.  249,  39  Pac.  643.) 

A  subscription  to  capital  stock  not  enforceable  until  the  entire 
capital  stock  is  subscribed.  (Denny  Hotel  Co.  v.  Schram,  6  Wash. 
134,  32"  Pac.  1002;  Denny  Hotel  Co.  v.  Gilmore,  6  Wash.  152,  32  Pac. 
1004;  Elderkin  v.  Peterson,  8  Wash.  674,  36  Pac.  1089.) 

That  all  the  capital  stock  was  never  subscribed  is  a  good  defense 
to  an  action  on  a  stock  subscription.  (Birge  v.  Browning,  11  Wash. 
249,  39  Pac.  643.) 

A  corporation  is  a  citizen  within  the  statute  (24  Stats,  at  Large, 
557)  authorizing  citizens  to  buy  government  lands.  (Ramsay  v. 
Taeoma  Land  Co.,  31  Wash.  351,  71  Pac.  1024.) 

A  corporation  not  liable  on  contract  between  stockholders  prior  to 
incorporation.  (Bash  v.  Culver  Gold  Min.  Co.,  7  Wash.  122,  34  Pac. 
462.) 

Corporation  liable  for  malicious  prosecution.  (Nichelson  v.  Cam- 
eron Lumber  Co.,  39  Wash.  569,  81  Pac.  1059.) 

A  national  bank  is  liable  for  a  fraud  committed  by  it.  (Pronger  v. 
Old  Nat.  Bank,  20  Wash.  618,  56  Pac.  391.) 

A  corporation  organized  under  laws  of  this  state  is  domestic  though 
majority  of  stock  owned  by  aliens.  (Hastings  v.  Anacortes  Packing 
Co.,  29  Wash.  224,  69  Pac.  776.) 

Transaction  of  business  by  a  corporation  before  all  its  stock  sub- 
scribed does  not  render  the  oflScers  liable  for  debts  of  the  company 
when  insolvent,  their  liability  being  prescribed  by  Ballinger's  Code, 
sections  4265,  4266.  (American  Radiator  Co.  v.  Kinnear,  56  Wash. 
210,  105  Pac.  630.) 

Parties  dealing  with  a  corporation  estopped  to  deny  its  legal 
existence.     (Carroll  v.  Pacific  Nat.  Bank,  19  Wash.  639.) 

General  demurrer  to  complaint  will  not  raise  question  of  incorpora- 
tion.    (Sly  V.  Palo  Alto  Gold  Mining  Co.,  28  Wash.  485.) 

Stock-books  presumptive  evidence  that  all  stock  subscribed.  (State 
ex  rel.  Columbia  Valley  R.  Co.  v.  Superior  Court,  45  Wash.  316.) 

Subscription  by  stenographer  held  valid  to  complete  total  sub- 
scription. (State  ex  rel.  Northern  Pacific  R.  Co.  v.  Superior  Court, 
49  Wash.  390.) 

Articles  of  incorporation  of  railroad  need  not  state  route,  length 
or  termini.  (State  ex  rel.  Milwaukee  Term.  R.  Co.  v.  Superior  Court, 
54  Wash.  365,  103  Pac.  469,  104  Pac.  175.) 

Subscription  to  entire  capital  stock  must  be  alleged  and  proved  by 
the  railroad  company  in  condemnation  proceedings.  (State  ex  rel. 
Hulrae  V.  Gray's  Harbor  etc.  Co.,  54  Wash.  530,  103  Pac.  809.) 


255  FORMATION    OF    GENERALLY.  §  402 

§  402.     Articles  of  Incorporation  to  be  Filed — Contents,  etc. 

[§  3679,  Rem.-Bal.]  Any  two  or  more  persons,  who  may 
desire  to  form  a  company  for  one  or  more  of  the  purposes 
specified  in  the  preceding  section,  shall  make  and  subscribe 
written  articles  of  incorporation  in  triplicate,  and  acknowledge 
the  same  before  any  officer  authorized  to  take  the  acknowledg- 
ment of  deeds,  and  file  one  of  such  articles  in  the  office  of  the 
Secretary  of  State,  and  another  in  the  office  of  the  county  au- 
ditor of  the  county  in  which  the  principal  place  of  business  of 
the  company  is  intended  to  be  located,  and  retain  the  third  in 
the  possession  of  the  corporation.  Said  articles  shall  state  the 
corporate  name  of  the  company,  the  objects  for  which  the 
same  shall  be  formed,  the  amount  of  its  capital  stock,  the  time 
of  its  existence,  not  to  exceed  fifty  years,  provided,  that  this 
limit  of  existence  shall  not  apply  to  any  life,  accident  and 
health  insurance  company;  the  number  of  shares  of  which 
the  capital  stock  shall  consist,  the  number  of  trustees  and  their 
names,  who  shall  manage  the  concerns  of  the  company  for 
such  length  of  time  (not  less  than  two  nor  more  than  six 
months)  as  may  be  designated  in  such  certificate,  and  the 
name  of  the  city,  town  or  locality  and  county  in  which  the 
principal  place  of  business  of  the  company  is  to  be  located. 
Amendments  may  be  made  to  the  articles  of  incorporation  by 
a  majority  vote  of  its  trustees  and  the  vote  or  written  assent 
of  two-thirds  of  the  capital  stock  of  such  corporation.  If  the 
written  assent  of  two-thirds  of  the  capital  stock  has  not  been 
obtained  then  the  vote  of  said  stock  may  be  taken  at  any 
regular  meeting  of  the  stockholders  or  at  any  special  meeting 
of  the  stockholders  called  for  that  purpose  in  the  manner 
provided  in  the  by-laws  of  such  corporation  for  special  meet- 
ings of  the  stockholders.  The  president  and  secretary  of  said 
corporation  shall  certify  said  amendments  in  triplicate  under 
the  seal  of  said  corporation  to  be  correct  and  file  and  keep 
the  same  as  in  the  case  of  original  articles,  and  from  the  time 
of  filing  said  amendments  such  corporation  shall  have  the 
same  powers,  and  it  and  the  stockholders  thereof  shall  be 
subject  to  the  same  liabilities  as  if  such  amendments  had  been 
embraced  in  the  original  articles  of  incorporation.     Nothing 


§  402  EXISTING    CORPORATION    LAWS,    1913.  256 

contained  in  this  section  shall  be  construed  to  cure  or  amend 
any  defect  existing  in  any  original  articles  of  incorporation  in 
that  such  articles  did  not  set  forth  the  matters  required  to 
make  the  same  valid  at  the  time  of  filing,  nor  to  cure  or  amend 
any  defect  in  the  execution  thereof.  The  time  of  existence 
of  such  corporation  shall  not  be  extended  by  amendments  be- 
yond the  time  fixed  in  the  original  articles  of  incorporation. 
'[Laws  1905,  §  1,  e.  11,  p.  228;  Cd.  1881,  §  2422;  1  H.  C, 
§1498;  Bal.,  §4251.] 

Person  construed  to  be  individual  as  distinct  from  corporation. 
(Denny  Hotel  Co.  v.  Schram,  6  Wash.  134.) 

Articles  of  incorporation  cannot  confer  greater  power  than  statute 
authorizes.  (Spokane  v.  Amsterdamsch  Trustees,  22  Wash.  172,  60 
Pac.  141;  Parsons  v.  Tacoma  Smelting  Co.,  25  Wash.  492,  65  Pac,  765.) 

Unless  authorized  by  the  articles  of  incorporation,  a  lease  of  all 
the  corporate  property  cannot  be  made  without  the  consent  of  all  the 
stockholders.  (Parsons  v.  Tacoma  Smelting  &  Refining  Co.,  25  Wash. 
492,  65  Pac.  765.) 

Mere  use  of  corporate  name,  no  articles  being  filed,  does  not  con- 
stitute de  facto  corporation,  (Bash  v.  Culver  Gold  Min.  Co.,  7  Wash. 
122,  34  Pac.  462.) 

Whether  a  corporation  is  de  jure  or  de  facto  can  be  raised  only  in 
an  appropriate  proceeding.  (State  ex  rel.  Amsterdamsch  Trustees 
Kantoor  v.  Superior  Court,  15  Wash.  668,  47  Pac.  31.) 

Objection  that  corporation  is  not  legally  formed  cannot  be  raised  to 
injury  of  third  parties  with  whom  it  has  done  business.  (Carroll  v. 
Pacific  Nat.  Bank,  19  Wash.  639,  54  Pac.  32.) 

General  demurrer  does  not  raise  question  of  incorporation.  (Sly  v. 
Palo  Alto  Gold  Mining  Co.,  28  Wash.  485,  68  Pac.  871.) 

Mandamus  will  not  issue  to  compel  secretary  to  file  improper  arti- 
cles. (State  ex  rel.  Baker  etc.  R.  Co.  v.  Nichols,  51  Wash.  619,  99 
Pac.  876.) 

Corporation  whose  business  is  confined  to  loaning  on  real  estate  ex- 
cepted from  statutory  restriction  upon  doing  business  before  stock 
subscribed.     (Brown  v.  Elwell,  17  Wash.  442,  49  Pac.  1068.) 

Articles  of  incorporation  constitute  a  contract  between  all  stock- 
holders, and  cannot  be  abrogated  without  consent  of  all.  (Parsons  v. 
Tacoma  Smelting  &  Refining  Co.,  25  Wash.  492,  65  Pac.  765.) 

Domestic  corporation  organized  by  aliens  not  an  alien  or  foreign 
corporation.  (Hastings  v.  Anacortes  Packing  Co.,  29  Wash.  224,  69 
Pac.  776.) 


257  FORMATION   OF    GENERALLY.  §§  403-405 

§  403.    List  of  Officers  to  be  Filed. 

[§3691,  Rem.-Bal.]  Every  corporation  heretofore  organ- 
ized under  the  laws  of  the  territory  or  state  of  Washington, 
and  every  corporation  which  may  hereafter  be  organized  under 
the  laws  of  this  state,  shall,  on  or  before  the  second  Tuesday  of 
January  of  each  year,  and  at  such  other  times  as  such  cor- 
porations may  elect  so  to  do,  file  with  the  county  auditor  of  the 
county  in  which  such  corporation  has  its  principal  place  of 
business,  a  statement,  sworn  to  by  its  president  and  attested 
by  its  secretary  and  sealed  with  its  corporate  seal,  containing 
a  list  of  all  its  officers  and  their  respective  titles  of  office, 
names  and  addresses,  and  the  term  of  office  for  which  they 
have  been  chosen.     [Laws  1895,  §  1,  p.  355;  Bal.,  §  4259.] 

§  404.     Corporations  Hereafter  Organized  to  File  Statement. 

[§  3692,  Rem.-Bal.]  Every  corporation  which  shall  be 
hereafter  organized  under  the  laws  of  this  state,  shall,  within 
thirty  days  after  it  shall  have  filed  its  certificate  of  incor- 
poration with  the  county  auditor  of  the  county  in  which  it 
has  its  principal  place  of  business,  file  with  such  county  auditor 
a  statement,  sworn  to  by  its  president  and  attested  by  its 
secretary  and  sealed  with  its  corporate  seal,  containing  a  list 
of  all  of  its  officers  and  their  respective  titles  of  office,  names 
and  address,  and  the  term  of  office  for  which  they  have  been 
chosen.     [Laws  1895,  §2,  p.  355;  Bal.,  §4260.] 

Failure  to  file  list  does  not  warrant  service  on  one  who  had  ceased  to 
be  connected  with  the  company.  (Lushington  v.  Seattle  etc.  Club,  60 
Wash.  546,  111  Pac.  785.) 

§  405.     Copy  of  Articles  as  Evidence. 

[§  3682,  Rem.-Bal.]  A  copy  of  any  certificate  of  incorpo- 
ration filed  in  pursuance  of  this  chapter,  and  certified  by  the 
auditor  of  the  county  in  which  it  is  filed,  or  his  deputy,  or  by 
the  Secretary  of  State,  shall  be  received  in  all  courts  and 
places  as  prima  facie  evidence  of  the  facts  therein  stated. 
[Laws  1873,  §3,  p.  399;  Cd.  1881,  §2423;  1  H.  C,  §1499; 
Bal.,  §  4252.] 
17 


§  406  EXISTING   CORPORATION  LAWS,   1913.  258 

Parol  evidence  that  a  company  is  doing  a  national  banking  business 
is  prima  facie  evidence  that  it  is  a  corporation.  (Yakima  National  Bank 
V.  Knipe,  6  Wash.  348,  33  Pac.  834.) 

Oral  evidence  of  existence  of  corporation  competent  prima  facie 
case  thereof.  (National  Bank  of  Commerce  v.  Galland,  14  Wash.  502, 
45  Pac.  35.) 

Certificate  of  county  auditor  showing  corporate  existence  under  Bal- 
linger's  Code,  section  4252,  prima  facie  proof  thereof.  (Spokane  & 
Idaho  Lumber  Co.  v,  Loy,  21  Wash.  501,  58  Pac.  672,  60  Pac.  1119.) 

Testimony  that  a  person  is  president  of  a  company  and  that  the  com- 
pany owns  certain  premises  is  prima  facie  proof  of  existence  of  the  com- 
pany.     (Stanford  Land  Co.  v.  Steidle,  28  Wash.  72,  68  Pac.  178.) 

Oral  proof  of  existence  of  corporation  when  admitted  without  objec- 
tion is  sufficient  substitute  for  certified  copy  of  articles.  (State  v. 
Pittam,  32  Wash.  137,  72  Pac.  1042.) 

Corporate  existence  is  admitted  by  filing  an  answer  as  that  of  the 
company.  (Frost  v.  Ainslee  Lumber  Co.,  3  Wash.  241,  28  Pac.  354,  915; 
Sengf elder  v.  Mutual  Life  Ins.  Co.,  5  Wash.  121,  31  Pac.  428;  Garneau 
v.  Port  Blakely  Mill  Co.,  8  Wash.  467,  36  Pac.  463.) 

Principal  and  sureties  on  bond  to  attach  property  of  corporation  es- 
topped to  deny  its  existence.  (Seattle  Crockery  Co.  v.  Haley,  6  Wash. 
302,  33  Pac.  650.) 

Mere  use  of  corporate  name  will  not  constitute  estoppel  to  deny  cor- 
porate existence.  (Bash  v.  Culver  Gold  Min.  Co.,  7  Wash.  122,  34  Pac. 
462.) 

Partial  payments  on  stock  subscriptions  do  not  necessarily  raise  es- 
toppel to  deny  corporate  existence.  (Birge  v.  Browning,  11  Wash.  249, 
39  Pac.  643.) 

Failure  to  allege  corporate  capacity  on  the  part  of  a  defendant  cor- 
poration is  only  bad  on  demurrer.  (Tobnie  v.  Dean,  1  Wash.  Ter.  46; 
Sengf  elder  v.  Mutual  Life  Ins.  Co.,  5  Wash.  121,  31  Pac.  428;  Garneau  v. 
Port  Blakely  Mill  Co.,  8  Wash.  467,  36  Pac.  463.) 

Certified  copy  of  articles  not  exclusive  method  of  proof.  (State  ex 
rel.  Clark  v.  Clallam,  62  Wash,  612,  114  Pac.  444.) 

§  406.     Corporate  Powers  Enumerated. 

[§3683,  Rem.-Bal.]  When  the  certificate  [articles]  shall 
have  been  filed,  the  persons  who  shall  have  signed  and  acknowl- 
edged the  same,  and  their  successors,  shall  be  a  body  corporate 
and  politic  in  fact  and  in  name,  by  the  name  stated  in  their 
certificate,  and  by  their  corporate  name  have  succession  for  the 
period  limited,  and  shall  have  power — 

1,  To  sue  and  be  sued  in  any  court  having  competent  juris- 
diction. 


259  FORMATION  OF  GENERALLY.  §  406 

2.  To  make  and  use  a  common  seal,  and  to  alter  the  same 
at  pleasure. 

3.  To  purchase,  hold,  mortgage,  sell  and  convey  real  and 
personal  property. 

4.  To  appoint  such  officers,  agents,  and  servants  as  the 
business  of  the  corporation  shall  require,  to  define  their 
powers,  prescribe  their  duties,  and  fix  their  compensation. 

5.  To  require  of  them  such  security  as  may  be  thought 
proper  for  the  fulfillment  of  their  duties,  and  to  remove  them 
at  will ;  except  that  no  trustee  shall  be  removed  from  office 
unless  by  a  vote  of  two-thirds  of  the  stockholders  as  here- 
inafter provided. 

6.  To  make  by-laws  not  inconsistent  with  the  laws  of  this 
state  or  the  United  States. 

7.  The  management  of  its  property,  the  regulation  of  its 
affairs,  the  transfer  of  its  stock,  and  for  carrying  on  all  kinds 
of  business  within  the  objects  and  purposes  of  the  company 
as  expressed  in  the  articles  of  incorporation.  [Laws  1873, 
§  4,  p.  399 ;  Cd.  1881,  §  2424 ;  1  H.  C,  §  1500 ;  Bal.,  §  4253.] 

Articles  of  incorporation  cannot  confer  greater  power  than  the  statute 
authorizes.  (Spokane  v.  Amsterdamsch  Trustees,  22  Wash.  172,  60  Pac. 
141;  Parsons  v.  Tacoma  Smelting  Co.,  25  Wash.  492,  65  Pac.  765.) 

A  by-law  may  be  abrogated  by  the  stockholders  by  their  acquiescence 
in  its  disregard  by  the  directors.  (Blair  v.  Metropolitan  Savings  Bank, 
27  Wasn.  192,  67  Pac.  609.) 

A  by-law  providing  for  certain  dividends  has  force  of  a  contract. 
(Seattle  Trust  Co.  v.  Pitner,  18  Wash.  401,  51  Pac.  1048.) 

Stockholders  employed  by  the  corporation  are  entitled  to  reasonable 
remuneration.  (Cors  &  Wegener  v.  Ballard  Iron  Works,  41  Wash.  390, 
83  Pac.  90O.) 

A  stockholder  may,  under  Ballinger's  Code,  sections  5780,  5781,  by 
quo  -warranto  proceeding,  oust  an  officer  of  the  company  illegally  holding 
office.     (State  ex  rel.  Mitchell  v.  Horan,  22  Wash.  197,  60  Pac.  135.) 

Title  to  corporate  office  cannot  be  tried  in  action  of  replevin  to  recover 
property  of  the  company.  (Standard  Gold  Min.  Co.  v.  Byers,  31  Wash. 
100,  71  Pac.  766.) 

Appointment  of  counsel  of  company  by  vice-president  in  absence  of 
president  valid  and  binding.  (Fernald  v.  Spokane  &  B.  C.  Tel.  Co.,  31 
Wash.  672,  72  Pac.  462.) 

Trustees  elected  by  minority  of  old  board  de  facto  officers,  (Baggot 
V.  Turner,  21  Wash.  339,  58  Pac.  212.) 


§  406  EXISTING    CORPOR.VTION   LAWS,    1913.  260 

De  facto  trustees  have  capacity  to  transact  corporate  business.  (Spo- 
kane V.  Amsterdamsch  Trustees  Kantoor,  23  Wash.  172,  60  Pac.  141.) 

Trustee  selling  his  stock  ipso  facto  ceases  to  be  trustee  under  Bal- 
linger's  Code,  section  4255.  (Oudin  &  Bergman  etc.  Min.  Co.  v.  Conlan, 
34  Wash.  216,  75  Pac.  798.) 

To  expel  trustee  from  office  under  Ballinger's  Code,  section  4255,  vote 
of  two-thirds  of  shares  of  stock  required.  (State  ex  rel.  Mitchell  v. 
Horan,  22  Wash.  197,  60  Pac.  135.) 

Meeting  of  board  of  trustees  presumed  to  be  regularly  called.  Notice 
not  spread  on  records  may  be  proved  aliunde.  (Budd  v.  Walla  Walla 
etc.  Co.,  2  Wash.  Ter.  347,  7  Pac.  896.) 

Same  person  may  be  president  and  secretary  of  board  of  trustees. 
(Budd  V.  Walla  Walla  etc.  Co.,  2  Wash.  Ter.  347,  7  Pac.  896.) 

Trustee  cannot  recover  for  services  within  his  duties  as  trustee  unless 
there  is  some  provision  therefor  other  than  by  the  trustees.  (Burns  v. 
Commencement  Bay  Land  Co.,  4  Wash.  558,  30  Pac.  668,  709.) 

One  bona  fide  claiming  to  be  officer  and  in  possession  of  books,  rec- 
ords, etc.,  will  not  be  ousted  by  injunction  pending  the  determination 
of  the  right.  (Standard  Gold  Min.  Co.  v.  Byers,  31  Wash.  100,  71  Pac. 
766.) 

Officers  of  company  liable  to  creditors  and  others  imjured  for  using 
corporate  name  and  pr  ^perty  in  their  individual  business.  (Morrison  v. 
Blue  Star  Nav.  Co.,  26  Wash.  541,  67  Pac.  244.) 

A  trustee  may  contract  with  the  corporation  if  his  conduct  be  open  and 
fair.     (Budd  v.  Walla  Walla  etc.  Co.,  2  Wash.  Ter.  347,  7  Pac.  896.) 

Contracts  by  directors  of  corporation  with  themselves  not  avoided 
where  proof  of  consideration  and  good  faith.  (Roy  &  Co.  v.  Scott, 
Hartley  Co.,  11  Wash.  399,  39  Pac.  679.) 

No  violation  of  his  official  trust  for  an  officer  of  a  company  to  buy 
corporate  stock  from  a  stockholder.  (O'Neile  v.  Ternes,  32  Wash.  528, 
73  Pac.  692.) 

Contract  between  two  corporations  having  same  board  of  trustees  not 
void  but  voidable,  and  capable  of  ratification.  (Roberts  v.  Washington 
Nat.  Bank,  11  Wash.  550,  40  Pac.  225.) 

Whether  fraud  in  the  issue  of  warrant  to  trustee  of  company  question 
of  fact  for  jury.  (Budd  v.  Walla  Walla  etc.  Co.,  2  Wash.  Ter.  347,  7 
Pac.  896.) 

General  powers  of  corporation  include  right  to  loan  money.  (Brown 
V.  Elwell,  17  Wash.  442,  49  Pac.  1068.) 

A  company  may  be  organized  to  do  several  kinds  of  business.  (Kig- 
gins  v.  Munday,  19  Wash.  233,  52  Pac.  855.) 

A  corporation  has  only  such  powers  as  are  conferred  upon  it  expressly 
or  are  necessarily  incidental  to  its  purposes.  (Washington  Mill  Co.  V. 
Sprague  Lumber  Co.,  19  Wash.  165,  52  Pac.  1067.) 


261  FORMATION  OF  GENERALLY.  §  406 

"Water  rights"  construed  as  used  incidentally  to  powers  of  mining 
company,  and  not  to  give  right  of  eminent  domain  as  water  company. 
(State  ex  rel.  Morrell  v.  Superior  Court,  33  Wash.  542,  74  Pac.  686.) 

A  farming  corporation  may  act  and  sue  as  trustee.  (Thorpe  v.  Tenem 
Ditch  Co.,  1  Wash.  566,  20  Pac.  588.) 

A  lumber  company  construed  not  to  have  power  to  become  accom- 
modation surety.  (Washington  Mill  Co.  v.  Sprague  Lum.  Co.,  19  Wash. 
165,  52  Pac.  1067.) 

A  contract  ultra  vires  the  charter  is  void.  (Washington  Mill  Co.  v. 
Sprague  Lumber  Co.,  19  Wash.  165,  52  Pac.  1067.) 

A  loan  originally  ultra  vires  subsequently  authorized  by  amendment 
of  charter  and  ratified  binding  on  the  corporation.  (Blair  v.  Metro- 
politan Savings  Bank,  27  Wash.  192,  67  Pac.  609.) 

A  franchise  granted  by  public  oflScers  ultra  vires  cannot  be  ratified 
or  supported  by  estoppel.  (State  ex  rel.  Spring  Water  Co.  v.  Monroe, 
40  Wash.  545,  82  Pac.  888.) 

Lessee  cannot  question  power  of  lessor  corporation  to  make  lease. 
(Hall  &  Paulson  Furn.  Co.  v.  Wilbur,  4  Wash.  644,  30  Pac.  665.) 

Corporation  having  received  benefit  of  contract  estopped  to  plead 
ultra  vires.  (Tootle  v.  First  Nat.  Bank,  6  Wash.  181,  33  Pac.  345;  Allen 
V.  Olympia  Light  &  Power  Co.,  13  Wash.  307,  43  Pac.  55 ;  Wheeler,  Os- 
good &  Co.  V.  Everett  Land  Co.,  14  Wash.  630,  45  Pac.  316;  Spokane  v. 
Amsterdamsch  Trustees  Kantoor,  22  Wash.  172,  60  Pac.  141;  Graton  & 
Knight  Mfg.  Co.  v.  Kedelsheimer,  28  Wash.  370,  68  Pac.  879;  Krisch  v. 
Interstate  Fisheries  Co.,  39  Wash.  381,  81  Pac.  855.) 

De  facto  trustees  may  transact  business  for  the  corporation.  (Spokane 
▼.  Amsterdamsch  Trustees  Kantoor,  22  Wash.  172,  60  Pac.  141.) 

Resolution  of  board  not  necessary  to  create  authority  in  agent  of  cor- 
poration. (Roberts  v.  Washington  Nat.  Bank,  11  Wash.  550,  40  Pac. 
225.) 

Transactions  between  two  corporations  carried  on  by  one  common 
agent  not  necessarily  invalid  for  that  reason.  (Roberts  v.  Washington 
Nat.  Bank,  11  Wash.  550,  40  Pae.  225.) 

Where  manager  of  corporation  stated  that  he  was  acting  as  manager  of 
the  company,  the  transaction  is  to  be  regarded  as  made  in  his  representa- 
tive capacity.      (Sutter  v.  Moore  Inv.  Co.,  30  Wash.  333,  70  Pae.  746.) 

A  transaction  extrinsic  to  the  general  business  of  a  corporation  and 
not  within  authority  of  the  general  manager  not  binding  on  the  corpora- 
tion.    (Cosh-Murray  Co.  v.  Adair,  9  Wash.  686,  38  Pac.  749.) 

Authority  to  make  contracts  is  not  authority  to  rescind  contracts. 
(Wallace  v.  Oceanic  Packing  Co.,  25  Wash.  143,  64  Pac.  938.) 

Authority  to  sign  bond  as  surety  would  be  presumably  for  bond  for 
penalty,  not  liquidated  damages.  (Roberts  v.  Washington  Water  Power 
Co.,  19  Wash.  392,  53  Pac.  664.) 


§  406  EXISTING   CORPORATION   LAWS,    1913.  262 

Acts  of  officers  customarily  performed  and  ratified  are  as  binding  on 
the  company  as  if  expressly  authorized.  (Duggan  v.  Pacific  Boom  Co., 
6  Wash.  593,  34  Pac.  157;  Miller  v.  Washington  T.  R.  Co.,  11  Wash. 
414,  39  Pac.  673;  Tootle  v.  First  Nat.  Bank,  6  Wash.  181,  33  Pac.  345; 
Seal  V.  Puget  Sound  Loan  &  Inv.  Co.,  5  Wash.  422,  32  Pac.  214.) 

Corporation  not  bound  by  unratified  acts  of  agent  without  authority, 
express  or  implied.  (Elvvell  v.  Puget  Sound  etc.  R.  Co.,  7  Wash.  487, 
35  Pac.  376.) 

Deed  by  de  facto  officers  not  void  but  voidable.  (Baggot  v.  Turner, 
21  Wash.  339,  58  Pac.  212.) 

Acts  of  one  held  out  as  manager  or  officer  of  corporation  or  ac- 
quiesced in  binding  on  the  corporation.  (Carrigan  v.  Port  Crescent 
Imp.  Co.,  6  Wash.  590,  34  Pac.  148;  Anderson  v.  Wallace  Lumber  & 
Mfg.  Co.,  30  Wash.  147,  70  Pac.  247;  Seal  v.  Puget  Sound  Loan  etc. 
Co.,  5  Wash.  422,  32  Pac.  214;  Miller  v.  Washington  So.  R.  Co.,  11 
Wash.  414,  39  Pac.  673 ;  Saunders  v.  United  States  Marble  Co.,  25  Wash. 
475,  65  Pac.  782;  Duggan  v.  Pacific  Broom  Co.,  6  Wash.  593,  34  Pac. 
157;  Roy  &  Co.  v.  Scott,  Hartley  &  Co.,  11  Wash.  399,  39  Pac.  679; 
Atlantic  Trust  Co.  v.  Behrend,  15  Wash.  466,  46  Pac.  642;  West  Seattle 
Land  Co.  v.  Novelty  Mill  Co.,  31  Wash.  435,  72  Pac.  69.) 

When  a  company  for  two  years  makes  no  move  to  rescind  a  sale  of 
real  estate  by  an  officer  without  authority,  the  company  is  bound. 
(Coolidge  v.  Schering,  32  Wash.  557,  73  Pac.  682.) 

A  corporation  accepting  and  retaining  benefits  of  transactions  is  es- 
topped from  denying  authority  of  the  officers  making  the  transaction. 
(Dexter  Horton  &  Co.  v.  Long,  2  Wash.  435,  27  Pac.  271;  Allen  v. 
Olympia  Light  &  Power  Co.,  13  Wash.  307,  43  Pac.  55;  Windsor  v. 
St.  Paul  Min.  R.  Co.,  37  Wash.  156,  79  Pac.  613;  Leslie  v.  Wilshire, 
6  Wash.  282,  33  Pac.  505.) 

A  contract  may  be  ratified  by  an  admission  of  its  execution  in  a 
pleading.  (Tingley  v.  Bellingham  Bay  Boom  Co.,  5  Wash.  644,  32 
Pac.  737,  33  Pac.  1055.) 

Where  an  indorsement  of  a  promissory  note  by  a  corporation  payee 
is  regular  in  form,  it  raises  presumption  of  authority.  (Citizens' 
Nat.  Bank  of  Tacoma  v.  Wintler,  14  Wash.  558,  45  Pac.  38.) 

Charter  of  company  showing  authority  of  agent  is  admissible  in  evi- 
dence for  that  purpose.  (Pacific  Nat.  Bank  v.  Aetna  Indemnity  Co., 
33  Wash.  428,  74  Pac.  590.) 

Whether  the  facts  show  authority  in  the  agent  of  the  corporation  is 
a  question  for  the  jury.  (Saunders  v.  United  States  Marble  Co.,  25 
Wash.  475,  65  Pac.  782.) 

An  ultra  vires  lease  is  voidable.  (Parsons  v.  Tacoma  Smelting  & 
Refining  Co.,  25  Wash.  492,  65  Pac.  765.) 

An  agreement  to  sell  all  the  corporate  property  to  another  company 
is  in  violation  of  Ballinger's  Code,  section  4265,  and  fraudulent.     (Ta- 


263  FORMATION  OF  GENERALLY.  §  406 

coma  Ledger  Co.  v.  Western  Home  Blclg.  Assn.,  37  Wash.  467,  79  Pac. 
992.) 

Stockholders  of  insolvent  corporation  cannot  dispose  of  the  assets  of 
the  company  to  the  detriment  of  the  creditors.  (Mitchell  v.  Jordan, 
36  Wash.  645,  79  Pac.  311.) 

A  sale  of  all  the  assets  of  a  company  to  a  reorganized  company  in  the 
absence  of  fraud  is  not  ultra  vires  and  void  as  to  minority  stockholders. 
(Pitcher  v.  Lone  Pine  Surprise  etc.  Min.  Co.,  39  Wash.  608,  81  Pac.  1047.) 

A  contract  ultra  vires  the  charter  is  void  as  to  creditors.  (Washington 
Mill  Co.  v.  Sprague  Lumber  Co.,  19  Wash.  165,  52  Pac.  1067.) 

Contract  of  employment  by  corporation  may  be  shown  by  the  facts. 
(Meals  V.  De  Soto  Placer  Mines  Co.,  33  Wash.  302,  74  Pac.  470.) 

A  trading  corporation  has  implied  pov^er  to  purchase  and  indorse 
bills  and  notes.  (Jamieson.  &  McFarland  v.  Heim,  43  Wash.  153,  86 
Pac.  165.) 

Conditions  inserted  in  mortgage  not  specifically  authorized  by  resolu- 
tion authorizing  the  mortgage  do  not  render  the  mortgage  void.  (Vin- 
cent V.  Snoqualmie  Mill  Co.,  7  Wash.  566,  35  Pac.  396.) 

Lumber  company  has  implied  power  to  become  surety  on  bond  of 
contractor  to  whom  it  furnishes  material,  such  being  the  custom. 
(Wheeler,  Osgood  &  Co.  v.  Everett  Land  Co.,  14  Wash.  630,  45  Pac.  316.) 

A  corporation  employing  a  physician  to  care  for  sick  employees  as  a 
charity  and  not  for  profit  is  not  liable  for  the  malpractice  or  negligence 
of  the  physician,  but  only  for  reasonable  care  in  his  selection.  (Rich- 
ardson v.  Carbon  Hill  Coal  Co.,  10  Wash.  648,  39  Pac.  95.) 

Only  the  state  can  question  the  ultra  vires  acts  of  a  company.  (Frost 
V.  Puget  Sound  Realty  Associates,  57  Wash.  629,  107  Pac.  1029.) 

Promise  by  treasurer,  "I  will  upon   demand  accept  a   return   of  his 

stock  and   refund   to   him    the   money   he   has   paid,"   signed,    " , 

Treas.,"  held  to  bind  the  treasurer  personally.      (Gavazza  v.   Plummer, 
53  Wash.  14,  101  Pac.  370.) 

In  the  absence  of  charter  authority,  a  corporation  cannot  become 
surety  on  a  note.  (Spencer  v.  Alki  Point  Transp.  Co.,  53  Wash.  77, 
101  Pac.  509.) 

Insurance  company  cannot  set  up  plea  of  ultra  vires  to  note  for  which 
it  had  received  benefits.  (Jackson  v.  Mercantile  Mut.  Fire  Ins.  Co., 
45  Wash.  244,  88  Pac.  127.) 

Where  a  corporation  holds  one  out  as  its  agent,  and  persons  act  with 
the  agent  as  with  the  company,  the  corporation  is  estopped  to  deny 
the  agent's  authority.  (Chilcott  v.  Wash.  State  Colonization  Co.,  45 
Wash.  148,  88  Pac.  113;  Russell  v.  Schade  Brewing  Co.,  49  Wash.  362, 
95  Pac.  327;  Moses  Land  Scrip  &  Realty  Co.  v.  Stack,  Gibbs  Lumber 
Co.,  56  Wash.  529,  106  Pac.  207;  Livieratos  v.  Commonwealth  Sec.  Co., 
57  Wash.  376,  106  Pac.  1125;  Rowland  v.  Carroll  Loan  &  Inv.  Co.,  44 
Wash.  413,  87  Pac.  482;  Harvey  v.  Sparks  Bros.,  45  Wash.  578,  88 
Pac.  1108;   lona  Warehouse  Co.  v.  Van  Buren,  50  Wash.  375,  97  Pac. 


/ 


§  407  EXISTING    CORPORATION   LAWS,    1913.  264 

291;  Nelson  v.  Western  Steam  Nav.  Co.,  52  Wash.  177,  100  Pac.  325; 
McKinley  v.  Mineral  Hill  Consol.  Min.  Co.,  46  Wash.  162,  89  Pac.  495; 
National  Bank  of  Commerce  v.  Puget  Sound  Biscuit  Co.,  61  Wash.  192, 

112  Pac.  265.) 

Where  the  president  and  general  manager  of  a  corporation  directs  a 
trespass  to  be  committed,  both  are  jointly  and  severally  liable  for  the 
torts  of  the  company.  (Lytle  Logging  etc.  Co.  v.  Humptulips  Driv- 
ing Co.,  60  Wash.  559,  111  Pac.  774.) 

Where  an  officer  and  trustee  owning  half  the  stock  increases  his  own 
salary  by  his  own  and  the  votes  of  subservient  trustees,  such  action  is 
fraudulent.  (Boothe  v.  Summit  Coal  Min.  Co.,  55  Wash.  167,  104  Pac. 
207.) 

Secretary  and  manager  of  corporation  cannot  purchase  its  property 
at  tax  sale  withoiH  color  of  fraud.      (Collins  v.  Hoffman,  62  Wash.  278, 

113  Pac.  625.) 

An  officer  owning  only  two  shares  of  stock  presumed  to  be  entitled  to 
reasonable  wages  and  entitled  to  offset  claim  for  wages  against  claim 
for  material  sold  to  him  by  the  company.  (Argo  Mfg.  Co.  v.  Parker, 
52  Wash.  100,  100  Pac.  188.) 

Fact  that  defendant  corporation  had  knowledge  of  pending  suit  against 
it  will  not  dispense  with  proper  service  upon  it.  (Osborne  v.  Columbia 
etc.  Co.,  9  Wash.  666,  38  Pac.  160.) 

If  an  action  is  begun  against  a  corporation  in  the  wrong  county,  the 
court  gets  no  jurisdiction  of  the  company.  (McMaster  v.  Thresher  Co., 
10  Wash.  147,  38  Pac.  760.) 

All  meetings  of  the  company  presumed  regular,  and  the  fact  that  one 
person  acted  as  president,  chairman  and  secretary  would  not  invalidate 
the  proceedings.  (Budd  v.  W.  W.  P.  &  P.  Co.,  2  Wash.  Ter.  347,  7  Pac. 
896.) 

In  showing  proceedings  of  the  board  of  directors,  all  that  was  said 
and  done  at  the  meeting  is  admissible.  (Tibbals  v.  Mt,  Olympus  Water 
Co.,  10  Wash.  329,  38  Pac.  1120.) 

Where  the  receiver  of  a  company  has  been  appointed,  officers  of  the 
company  cannot  be  examined  in  supplementary  proceedings.  (Allen  v. 
Stallcup,  13  Wash.  631,  43  Pac.  884.) 

Conveyance  of  real  estate  to  the  company  for  purpose  outside  its 
charter  authority  may  be  voidable,  but  is  not  void.  (Milton  v.  Craw- 
ford, 65  Wash.  145,  118  Pac.  32.) 

Power  of  removal  (subdivision  5)  held  to  constitute  part  of  a  con- 
tract of  employment.  (Llewellyn  v.  Aberdeen  Brewing  Co.,  65  Wash. 
319,  118  Pac.  30.) 

§  407.     Corporate  Powers,  How  Exercised — By-laws,  etc. 

[§  3686.  Rem.-Bal.]  The  corporate  powers  of  a  corpora- 
tion shall  be  exercised  by  a  board  of  not  less  than  two  trus- 


265  FORMATION   OF    GENERALLY.  §  407 

tees,  who  shall  be  stockholders  in  the  company,  and  at  least 
one  of  whom  shall  be  a  resident  of  the  state  of  Washington, 
and  a  majority  of  them  citizens  of  the  United  States,  who 
shall,  before  entering  upon  the  duties  of  their  office,  respec- 
tively take  and  subscribe  to  an  oath,  as  provided  by  the  laws 
of  this  state,  and  who  shall,  after  the  expiration  of  the  term 
of  the  trustees  first  elected,  be  actually  elected  by  the  stock- 
holders, at  such  time  and  place,  within  this  state,  and  upon 
such  notice,  and  in  such  manner,  as  shall  be  directed  by  the 
by-laws  of  the  company,  but  all  elections  shall  be  by  ballot, 
and  each  stockholder,  either  in  person  or  by  proxy,  shall 
be  entitled  to  as  many  votes  as  he  may  own,  or  represent  by 
proxy,  shares  of  stock,  and  the  person  or  persons  receiving 
the  greatest  number  of  votes  shall  be  trustee  or  trustees : 
Provided,  that  nothing  herein  contained  shall  prevent  any 
corporation,  by  their  by-laws,  limiting  such  bona  fide  share- 
holder to  a  single  vote,  or  one  vote  for  every  full  share  of 
paid-up  stock,  or  its  equivalent  in  assessable  stock,  disregard- 
ing the  number  of  shares  of  stock  he  may  own.  It  shall  be 
competent,  at  any  time,  for  two-thirds  of  the  stockholders  of 
any  corporation  organized  under  this  chapter  to  expel  any 
trustee  from  office,  and  to  elect  another  to  succeed  him.  In 
all  cases  where  a  meeting  of  the  stockholders  is  called  for 
the  purpose  of  expelling  a  trustee  and  electing  his  successor, 
such  notice  shall  be  given  of  the  meeting  as  the  by-laws  of 
the  company  may  require.  Whenever  any  vacancy  shall 
happen  among  the  trustees  by  death,  resignation  or  other- 
wise, except  by  removal,  and  the  election  of  his  successor  as 
herein  provided,  it  shall  be  filled  by  appointment  of  the  board 
of  trustees.  Every  such  corporation  shall  at  all  times  keep 
at  its  principal  place  of  business  in  this  state  an  officer  or 
officers,  agent  or  agents,  upon  whom  service  of  legal  process 
may  be  made  in  conformity  with  the  law:  Provided,  that 
service  of  such  process  may  be  made  at  any  time  upon  any 
resident  trustee  of  such  corporation.  [Laws  1895,  §  1,  p.  61 ; 
Cd.  1881,  §  2425 ;  1  H.  C,  §  1502 ;  Bal.,  §  4255.] 

Articles  of  incorporation  cannot  confer  greater  power  tlian  the  stat- 
ute authorizes.  (Spokane  v.  Anisterdamsch  Trustees,  22  Wash.  172,  60 
Pac.  141;  Parsons  v.  Tacoma  Smelting  Co.,  25  Wash.  492,  65  Pac.  765.) 


§  407  EXISTING    CORPOR.VTION   LAWS,    1913.  266 

Lease  of  corporate  property  voidable  at  complaint  of  stockhoMer  when 
one  of  the  trustees  of  the  lessor  company  necessary  to  constitute  major- 
ity required  by  statute  also  interested  in  lessee  company.  (Parsons  v. 
Tacoma  Smelting  &  Refining  Co.,  25  Wash.  492,  65  Pac.  765.) 

A  stockholder  has  no  right  against  a  trustee  to  the  possession  or  con- 
trol of  corporate  property.  (Oudin  &  Bergman  etc.  Min.  Co.  v.  Conlan, 
34  Wash.  216,  75  Pac.  798.) 

An  action  by  a  stockholder  and  creditor  against  another  stockholder 
and  officer  of  company  which  was  not  a  party  to  restrain  fraudulent 
sale  maintainable,  complaint  not  demurrable.  (Cross  v.  Johnson,  20 
Wash.  124,  54  Pac.  1000.) 

After  a  corporation  has  ceased  to  do  business,  a  trustee  having  ceased 
to  be  such  is  no  longer  in  a  fiduciary  position,  and  may  purchase  out- 
standing obligations  of  the  corporation  and  enforce  them  for  his  own 
benefit.     (Stanton  v.  Gilpin,  38  Wash.  191,  80  Pac.  290.) 

Trustee  cannot  recover  for  services  within  his  duties  as  trustee  unless 
there  is  some  provision  therefor  other  than  by  the  trustees.  (Burns  v. 
Commencement  Bay  Land  Co.,  4  Wash.  558,  30  Pac.  668,  709.) 

Corporation  held  estopped  to  question  validity  of  purchase  of  its  own 
shares  of  stock,  money  having  been  paid  and  no  question  raised  for 
two  years.  (Miller  v.  Washington  Southern  R.  Co.,  11  Wash.  414,  39 
Pac.  673.) 

A  corporation  may  take  its  own  stock  in  payment  of  debt  if  trans- 
action bona  fide.     (Barto  v.  Nix,  15  Wash.  563,  46  Pac.  1033.) 

A  claim  owned  by  a  corporation  suflSciently  assigned  by  officers  own- 
ing practically  all  the  stock  of  the  company.  (Glover  v.  Rochester- 
German  Ins.  Co.,  11  Wash.  143,  39  Pac.  380.) 

Mortgage  given  by  one  corporation  to  another,  the  same  person  being 
president  of  both,  not  necessarily  fraudulent  for  that  reason.  (Roy  & 
Co.  V.  Scott,  Hartley  &  Co.,  11  Wash.  399,  39  Pac.  679.) 

Where  a  company  for  two  years  makes  no  move  to  rescind  a  sale  of 
real  estate  by  an  officer  without  authority,  the  company  is  bound. 
(Coolidge  V.  Schering,  32  Wash.  557,  73  Pac.  682.) 

A  corporation  accepting  and  retaining  benefits  of  transactions  is  es- 
topped from  denying  authority  of  the  officers  making  the  transaction. 
(Dexter  Horton  &  Co.  v.  Long,  2  Wash.  435,  27  Pac.  271;  Allen  v. 
Olympia  Light  &  Power  Co.,  13  Wash.  307,  43  Pac.  55;  Windsor  v.  St. 
Paul  Min.  R.  Co.,  37  Wash.  156,  79  Pac.  613;  Leslie  v.  Wilshire,  6 
Wash.  282,  33  Pac.  505.) 

A  contract  may  be  ratified  by  an  admission  of  its  execution  in  a 
pleading.  (Tingley  v.  Bellingham  Bay  Boom  Co.,  5  Wash.  644,  32  Pac. 
737,  33  Pac.  1055.) 

Statute  that  powers  of  corporation  shall  be  exercised  by  directors  does 
not  exclude  acts  by  agents  authorized  or  ratified  by  stockholders  directly. 
(Kirwin  v.  Washington  Match  Co.,  37  Wash.  285,  79  Pac.  928.) 

Circumstances  may  show  ratification  by  eorporuliun.  (Austin  v.  Elk 
Mercantile  Co.,  38  Wash.  365,  80  Pac.  525.) 


267  FORMATION   OF    GENERALLY.  §  407 

Proof  of  implied  authority  of  officers  of  corporation  to  execute  nego- 
tiable paper  must  be  clear.  (Elwell  v.  Puget  Sound  &  Chehalis  R.  Co., 
7  Wash.  487,  35  Pac.  376.) 

Where  indorsement  of  promissory  note  by  corporation  payee  is  regular 
in  form,  it  raises  presumption  of  authority.  (Citizens'  Nat.  Bank  of 
Tacoma  v.  Wintler,  14  Wash.  558,  45  Pac.  38.) 

Transfer  of  property  bj'  insolvent  company,  while  fraudulent  pref- 
erence, will  not  warrant  attachment  of  the  property.  (Holbrook  v. 
Peters  &  Miller  Co.,  8  Wash.  344,  36  Pac.  256.) 

Insolvency  of  corporation  does  not  alone  make  sale  by  it  fraudulent. 
(Mayer  v.  Woolery,  10  Wash.  354,  39  Pac.  135;  Egberts  v.  Washington 
Nat.  Bank,   11  Wash.  550,  40  Pac.  225.) 

Directors  of  insolvent  corporation  are  trustees  of  assets  for  creditors. 
(Potvin  V.  Denny  Hotel  Co.,  26  Wash.  309,  66  Pac.  376;  Tacoma  Ledger 
Co.  V.  Western  Home  Assn.,  37  Wash.  467,  79  Pac.  992.) 

Mortgage  of  property  by  insolvent  company  to  trustee  to  secure  in- 
debtedness, the  company  to  continue  in  possession,  voidable  by  creditors. 
(Thompson  v.  Huron  Lumber  Co.,  4  Wash.  600,  30  Pac.  741,  31  Pac.  25.) 

Chattel  mortgage  by  insolvent  corporation  not  necessarily  held  void. 
(Leslie  v.  Wilshire,  6  Wash.  282,  33  Pac.  505.) 

Mortgage  by  insolvent  corporation  by  way  of  voluntary  preference  is 
void  as  to  creditors.  (Biddle  Purchasing  Co.  v.  Pt.  Townsend  Steel 
Co.,  16  Wash.  681,  48  Pac.  407;  Cook  v.  Moody,  18  Wash.  114,  50  Pac. 
1020;  Van  Brocklin  v.  Queen  City  Print  Co.,  19  Wash.  552,  53  Pac.  822.) 

Creditor  who  has  consented  and  received  benefit  estopped  from  assert- 
ing mortgage  by  insolvent  company  void.  (Bank  of  California  v.  Puget 
Sound  Loan  &  T.  Co.,  20  Wash.  636,  56  Pac.  395.) 

Mortgage  not  fraudulent  where  company  solvent  at  time  of  itr  being 
made,  though  it  subsequently  became  insolvent.  (Strohl  v.  Seattle 
Nat.  Bank,  25  Wash.  28,  64  Pac.  916.) 

Property  of  insolvent  corporation  is  trust  fund  for  creditors  and  a 
voluntary  preference  is  void.  (Mitchell  v.  Jordan,  36  Wash.  645,  79 
Pac.  311;  Allen  v.  Baxter,  42  Wash.  434,  85  Pac.  26;  McKay  v.  Elwood, 
12  Wash.  579,  41  Pac.  919;  Compton  v.  Swabacher  Bros.  &  Co.,  15  Wash. 
30-6,  46  Pac.  338;  Washington  Liquor  Co.  v.  Alladio  Cafe  Co.,  28  Wash. 
176,  68  Pac.  444;  Wilson  v.  Book,  13  Wash.  676,  43  Pac.  939;  Watterson 
v.  Masterson,  15  Wash.  511,  46  Pac.  1041;  Carrol  v.  Pacific  Nat.  Bank,  19 
Wash.  639,  54  Pac.  32;  Burrell  v.  Bennett,  20  Wash.  644,  56  Pac.  375; 
Stewart  v.  Gould,  8  Wash.  367,  36  Pac.  277;  Smith  v.  Hopkins,  10  Wash. 
77,  38  Pac.  854.) 

Transfer  of  property  by  insolvent  corporation  at  its  full  value  not 
fraudulent  preference.  (Klosterman  v.  Mason  County  etc.  B.  Co.,  8 
Wash.  281,  36  Pac.  136.) 

Remedy  of  creditor  in  case  of  fraudulciit  transfer  by  insolvent  com- 
pany is  by  complaint  in  equity  to  subject  all  a.ss.ets  to  equal  distribu- 
tion. (Holbrook  v.  Peters  &  Miller  Co.,  8  Wash.  344,  36  Pac.  256; 
Wooding  V.  Wooding  Co.,  10  Wash,  531,  39  Pac.  137;   Allen  v.  Stall- 


§  407  EXISTING    CORrORATION   LAWS,    1913.  268 

cup,  13  Wash.  631,  43  Pac.  884;  Sligh  v.  Shelton  Southwestern  E.  C!o.,  20 
Wash.  16,  54  Pac.  763.) 

Insolvent  company  may  make  common-law  assignment  for  benefit  of 
creditors.  (Nyman  v.  Berry,  3  Wash.  734,  29  Pac.  557;  McKay  t, 
Elwood,  12  Wash.  579,  41  Pac.  919;  Cerf,  Schloss  &  Co.  t.  Wallace,  14 
Wash.  249,  44  Pac.  264.) 

Eeceiver  is  entitled  to  possession  of  assets  as  against  assignee.  (Ole- 
son  V.  Bank  of  Tacoma,  15  Wash.  148,  45  Pac.  734.) 

Receiver  may  be  appointed  for  insolvency  of  corporation  under  Bal- 
linger's  Code,  section  5456.  (Washington  Liquor  Co.  v.  Alladio  Cafe 
Co.,  28  Wash.  176,  68  Pac.  444;  Davis  v.  Edwards,  41  Wash.  480,  84 
Pac.  22;  Thompson  v.  Huron  Lumber  Co.,  4  Wash.  600,  30  Pac.  741, 
31  Pac.  25;  New  York  Nat.  Exch.  Bank  v.  Met.  Sav.  Bank,  28  Wash. 
553,  68  Pac.  905;  Oleson  v.  Bank  of  Tacoma,  15  Wash.  148,  45  Pac. 
734;   State  ex  rel.  Strohl  v.  Superior  Court,  20  Wash.  545,  56  Pac.  35.) 

Receiver  may  be  appointed  for  fraud,  waste  or  maladministration  of 
assets.  (Cameron  v.  Groveland  Imp.  Co.,  20  Wash.  169,  54  Pac.  1128; 
Fernald  v.  Spokane  &  B.  C.  Tel.  Co.,  31  Wash.  672,  72  Pac.  462.) 

Appointment  of  receiver  does  not  oust  sheriff  in  actual  possession 
and  not  made  party.  (State  ex  rel.  Hunt  v.  Superior  Ct.,  8  Wash.  210, 
35  Pac.  1087;  State  ex  rel.  Shelly  v.  Superior  Court,  8  Wash.  659,  35 
Pac.  1092;  State  ex  rel.  Perkins  v.  Graham,  9  Wash.  528,  36  Pac.  1085.) 

Appointment  of  receiver  does  not  work  dissolution  of  corporation. 
(Allen  V.  Olympia  Light  &  Power  Co.,  13  Wash.  307,  43  Pac,  55.) 

Receiver  of  insolvent  company  is  trustee  for  stockholders  and  cred- 
itors. (Thompson  v.  Huron  Lumber  Co.,  4  Wash.  600,  30  Pac.  741,  31 
Pac.  25;  Washington  Mill  Co.  v.  Sprague  Lumber  Co.,  19  Wash.  165, 
52  Pac.  1067';  Wilson  v.  Book,  13  Wash.  676,  43  Pac.  939;  Watterson 
V.  Masterson,  15  Wash.  511,  46  Pac.  1041;  Mitchell  v.  Jordan,  36  Wash. 
645,  79  Pac.  311.) 

Where  a  mining  company  was  formed  to  "buy,  sell  and  deal  in"  mines, 
the  trustees  may  sell  all  the  property  and  assets  of  the  company  against 
objection  of  minority  stockholders,  since  such  sale  is  within  the  cor- 
porate purposes  of  the  company.  (Lange  v.  Reservation  Min.  &  Smelt- 
ing Co.,  48  Wash.  167,  93  Pac.  208.) 

A  corporation  held  bound  by  the  sale  of  its  land  by  the  president 
as  his  individual  property  where  he  owned  all  but  two  shares  of  the 
stock.      (Roberts  v.  Hilton  Land  Co.,  45  Wash.  464,  88  Pac.  946.) 

A  trustee  receiving  individually  part  of  the  consideration  for  the  sale 
of  the  corporate  assets  is  liable  to  creditors  of  the  company.  (Carstens 
&  Earles  v.  Hofius,  44  Wash.  456,  87  Pac.  631.) 

Director  cannot  recover  for  services  rendered  the  corporation  unless 
clearly  outside  his  ordinary  duties  and  there  is  clear  understanding  that 
the  services  are  to  be  paid  for.  (Dial  v.  Inland  Logging  Co.,  52  Wash. 
81,  100  Pac.  157.) 

Where  syndicate  of  officers  and  stockholders  purchased  a  competing 
business  and  resold  it  to  the  company  at  a  profit,  there  being  no  fraud, 


269  FORMATION   OF    GENERALLY.  §  408 

a  minority  stockholder  who  had  waived  any  objections  held  estopped 
from  maintaining  suit  to  set  aside  the  transaction.  (Baker  v.  Seattlc- 
Tacoma  Power  Co.,  61  Wash.  578,  112  Pae.  647.) 

In  suit  by  stockholders  it  is  unnecessary  to  show  demand  for  cor- 
porate action  where  such  demand  would  be  useless.  (Williams  v.  Erie 
Mountain  Consol.  Min.  Co.,  47  Wash.  360,  91  Pac.  1091.) 

Equity  will  not  entertain  suit  by  stockholders  to  set  aside  corporate 
contract  where  it  is  not  shown  that  redress  within  the  corporation  was 
sought  nor  excuse  shown  for  failure  so  to  do.  (Elliott  v.  Puget  Sound 
Wood  Products  Co.,  52  Wash.  637,  101  Pac.  228.) 

Stockholder's  proxy  binds  the  owner  in  the  absence  of  fraud.  (Baker 
V.  Seattle  Tacoma  Power  Co.,  61  Wash.  578,  112  Pac.  647.) 

Complaint  by  minority  stockholders  for  "freeze-out"  demurrable  where 
they  fail  to  show  that  they  have  exhausted  their  remedies  within  the 
company  nor  excuse  such  failure.  (Seattle  &  Northern  R.  Co.  v.  Bow- 
man, 53  Wash.  416,  102  Pac.  27.) 

Minority  stockholder  cannot  object  to  action  of  majority  intra  vires 
and  not  fraudulent.  (Theis  v.  Spokane  Falls  Gaslight  Co.,  49  Wash. 
477,  95  Pac.  1074.) 

Promoter's  contract  afterward  adopted  by  the  company  is  binding 
upon  it.  (Chilcott  v.  Wash.  State  Colonization  Co.,  45  Wash.  148,  88 
Pac.  113.) 

Provision  in  contract  that  one  party  may  vote  another's  stock  is  valid. 
(Winsor  v.  Commonwealth  Coal  Co.,  63  Wash.  62,  114  Pac.  908.) 

A  corporation  not  able  to  pay  its  debts  in  due  course  is  insolvent. 
(Nixon  v.  Hendy  Machine  Works,  51  Wash.  419,  99  Pac.  11.) 

A  corporation  taking  over  the  assets  of  another  company,  knowing 
it  to  be  unable  to  pay  its  creditors,  assumes  the  obligations  of  such 
insolvent  corporation.  (Carstens  &  Earles  v.  Hofius,  44  Wash.  456,  87 
Pac.  631.) 

That  the  assets  of  an  insolvent  corporation  are  a  trust  fund  for 
creditors  does  not  affect  the  sale  under  a  mortgage  given  when  the  com- 
pany was  solvent.  (Boyes  v.  Turk  Min.  Co.,  56  Wash.  515,  106  Pac. 
475.) 

Purchase  of  corporate  assets  by  part  of  stockholders  not  fraud  per  se. 
(Boyes  v.  Turk  Min.  Co.,  56  Wash.  515,  106  Pac.  475.) 

While  knowledge  of  a  single  officer  not  imputable  to  the  corporation, 
it  may  put  the  trustees  on  inquiry  and  bo  constitute  notice.  (Poultry 
Producers'  Union  v.  Williams,  58  Wash.  64,  107  Pac.  1040.) 

§  408.     May  Hold,  Own  and  Vote  Stock  of  Other  Companies. 

[§  3684,  Rem.-Bal.]  That  any  corporation  heretofore  or 
hereafter  organized  under  the  laws  of  this  state  or  of  any 
other  state  or  territory  of  the  United  States  and  doing  busi- 
ness in  this  state  shall  have  power  and  authority  to  subscribe 
for,  acquire  by  purchase  or  otherwise,  and  to  own,  hold,  sell, 


§§409,410     EXISTING  CORPORATION  LAWS,  1913.  270 

assign  and  transfer  shares  of  the  capital  stock  of  any  other 
corporation  and  by  its  dnly  authorized  officer  or  proxy  to 
vote  such  shares  at  any  and  all  stockholders'  meetings  of  the 
corporation  whose  shares  are  so  held  and  to  have  and  exer- 
cise all  the  rights,  powers  and  privileges  of  any  other  stock- 
holder, except  that  such  corporate  OAvner  cannot  be  a  mem- 
ber of  the  board  of  trustees.  All  existing  holdings  by  any 
such  corporation  in  the  shares  of  the  capital  stock  of  any 
other  corporation  are  hereby  validated.  [Laws  1905,  §  1, 
c.  27,  p.  51.] 

Articles  of  incorporation  cannot  confer  greater  power  than  the  stat- 
ute authorizes.  (Spokane  v.  Amsterdamsch,  22  Wash.  172,  60  Pac. 
141;  Parsons  v.  Tacoma  Smelting  Co.,  25  Wash.  492,  65  Pac.  765.) 

Though  authorized  by  the  articles  of  incorporation  to  own  stock  in 
other  companies,  a  company  owning  such  stock  cannot  vote  it  in  absence 
of  statutory  authority.  (Parsons  v.  Tacoma  Smelting  &  Kefining  Co., 
25  Wash.  492,  65  Pac.  765.)    - 

Corporation  held  estopped  to  question  validity  of  purchase  of  its  own 
shares  of  stock,  money  having  been  paid  and  no  question  raised  for  two 
years.  (Miller  v.  Washington  Southern  R.  Co.,  11  Wash.  414,  39  Pac. 
673.) 

A  corporation  may  take  its  own  stock  in  payment  of  debt  if  trans- 
action bona  fide.      (Barto  v.  Nix,  15  Wash.  563,  46  Pac.  1033.) 

Laws  of  1905,  page  51,  authorizing  corporations  to  own  and  hold  stock 
in  other  corporations  is  constitutional.  (State  ex  rel.  Mcintosh  v.  Su- 
perior Court,  56  Wash.  214,  105  Pac.  637.) 

Banks  may  not  hold  stock  in  other  banks.     (Rem.-Bal.,  sec.  3224.) 

§  409.    Lapse  of  Election  of  Trustees. 

[§  3687,  Rem.-Bal.]  If  it  shall  happen  at  any  time  that  an 
election  of  trustees  shall  not  be  made  on  the  day  designated 
by  the  by-laws  of  the  company,  the  corporation  shall  not.  for 
that  reason,  be  dissolved;  but  it  shall  be  lawful  on  any  other 
day  to  hold  an  election  for  trustees,  in  such  manner  as  shall 
be  provided  for  in  the  by-laws  of  the  company,  and  all  acts 
of  the  trustees  shall  be  valid  and  binding  upon  the  company 
until  their  successors  ^re  elected  and  qualified.  [Laws  1873, 
§  6,  p.  400;  Cd.  1881,  §  2426;  1  H.  C,  §  1503;  Bal.,  §  4256.] 

§  410.     Quonim. 

[§  3688,  Rem.-Bal.]  A  majority  of  the  whole  number  of 
trustees  shall  form  a  board  for  the   transaction  of  business, 


271  FORMATION   OF    GENERALLY.  §§411,412 

and  every  decision  of  a  majority  of  the  persons  duly  as- 
sembled as  a  board  shall  be  valid  as  a  corporate  act.  [Laws 
1873,  §7,  p.  401;  Cd.  1881,  §2427;  1  H.  C,  §1504;  Bal., 
§  4257.] 

§  411.    Meetings,  Where  Held. 

[§3690,  Rem.-Bal.]  Meetings  of  the  stockholders  of  a 
corporation  shall  be  held  at  its  principal  place  of  business 
within  this  state.  Meetings  of  the  board  of  trustees  or  di- 
rectors of  corporations,  organized  and  existing  under  the 
laws  of  this  state,  may  be  held  at  such  place  or  places  within 
or  without  the  state  as  may  be  designated  in  the  articles  of 
incorporation  or  by-laws.  In  case  the  meetings  of  the  board 
of  directors  or  trustees  of  a  corporation  shall  be  held  outside 
of  the  state  of  Washington,  either  the  original  or  full  and 
complete  copies  or  duplicate  of  all  proceedings  had  at  such 
meeting  or  meetings  certified  by  the  secretary  under  the 
corporate  seal  shall  be  sent  to  and  kept  at  the  principal  office 
or  place  of  business  of  the  corporation  in  this  state  and  shall 
be  part  of  the  records  of  the  corporation  in  this  state. 
[Laws  1907,  §  1,  p.  205.] 

A  stockholder  cannot  bring  action  against  third  parties  for  wrong  done 
the  corporation  where  the  corporation  has  not  refused  to  act.  (Ninne- 
man  v.  Fox,  43  Wash.  43,  86  Pac.  213.) 

A  stockholder  may  not  intervene  in  a  suit  affecting  the  company  as 
such  unless  the  company  refuses,  and  such  intervention  is  clearly  neces- 
sary to  protect  the  stockholders'  rights.  (Bissell  v.  Taylor,  7  Wash. 
324,  35  Pac.  68.) 

§  412.     First  Meeting — Notice,  etc. 

[§  3689,  Rem.-Bal.]  The  first  meeting  of  the  trustees  shall 
be  called  by  a  notice,  signed  by  one  or  more  persons  named  as 
trustees  in  the  certificate,  setting  forth  the  time  and  place  of 
meeting,  which  notice  shall  be  delivered  personally  to  each 
trustee,  or  published  at  least  twenty  days  in  some  news- 
paper in  the  county  in  which  the  principal  place  of  business 
of  the  corporation,  or  if  no  newspaper  is  published  in  the 
county,  then  in  some  newspaper  nearest  thereto  in  the  state. 
[Laws  1873,  §8,  p.  401;  Cd.  1881,  §2428;  1  H.  C,  §1505; 
Bal.,  §  4258.] 


§  413  j:xisting  corporation  laws,  1913.  272 

Proof  of  notice  of  meeting  may  be  made  other  than  by  its  records. 
(Budd  V.  Co.,  2  Wash.  Ter.  347.) 

§  413.     Stock  Personal  Estate — Transfer  of. 

[§  3693,  Rem.-Bal.]  The  stock  of  the  company  shall  be 
deemed  personal  estate,  and  shall  be  transferable  in  such 
manner  as  shall  be  prescribed  by  the  by-laws  of  the  com- 
pany ;  but  no  transfer  shall  be  valid  except  between  the  par- 
ties thereto,  until  the  same  shall  have  been  entered  upon  the 
books  of  the  company,  so  as  to  show  the  names  of  the  par- 
ties, by  and  to  w^hom  transferred,  the  numbers  and  designa- 
tion of  the  shares,  and  the  date  of  the  transfer.  [Laws  1873, 
§  9,  p.  401 ;  Cd.  1881,  §  2429 ;  1  H.  C,  §  1506 ;  Bal.,  §  4261.] 

One  who  purchases  stock  with  agreement  to  sell  it  back  becomes  a 
stockholder  on  receiving  the  stock,  as  distinguished  from  debtor  and 
creditor  relation.  (Yeaton  v.  Eagle  Oil  &  Refining  Co.,  4  Wash.  183, 
29  Pac.  1051.) 

Purchase  and  sale  of  stock  may  be  rescinded  for  fraud.  (Mulholland 
V.  Wash.  Match  Co.,  35  Wash.  315,  77  Pac.  497;  Krisch  v.  Interstate 
Fisheries  Co.,  39  Wash.  381,  81  Pac.  855.) 

A  transfer  of  stock  not  registered  is  binding  between  the  parties  under 
Code  of  1882,  section  2429,  and  passes  title  against  a  subsequent  pur- 
chaser on  execution  sale  against  transferrer.  (Port  Townsend  Nat.  Bank 
V.  Port  Townsend  etc.  Co.,  6  Wash.  597,  34  Pac.  155;  Dearborn  v. 
Washington  Sav.  Bank,  18  Wash.  8,  50  Pac.  575.) 

Where  no  stock  register  is  kept,  transfer  on  records  of  company  ac- 
cording to  custom  of  the  company  binds  the  company.  (Stewart  v. 
Walla  Walla  P.  &  P.  Co.,  1  Wash.  521,  20  Pac.  605.) 

Stock  in  a  corporation  may  be  garnished  and  sold  to  the  extent  of 
the  judgment  debtor's  interest.  (Hardin  v.  White  Swan  Min.  etc.  Co., 
26  Wash.  583,  67  Pac.  236.) 

A  company  may  waive  provision  under  Ballinger's  Code,  section  4261, 
that  transfer  of  stock  is  void  until  entered  in  books  of  company.  (Van 
Horn  V.  New  Western  Shingle  Co.,  54  Wash.  117,  103  Pac.  42.) 

Undisclosed  owner  of  stock  standing  in  the  name  of  another  not  en- 
titled to  notice  of  stockholders'  meeting.  (Wright  v.  Tacoma  Gas  & 
Elec.  Light  Co.,  53  Wash.  262,  101  Pac.  865.) 

A  corporation  held  entitled  to  have  spurious  stock  fraudulently  issued 
by  the  secretary  canceled.  (Dreyfus  Min.  Co.  v.  Willard,  46  Wash.  345, 
&9  Pac.  935.) 

Where  stock  is  assigned  and  certificate  issued  to  another  than  desig- 
nated owner,  the  company  cannot  forfeit  the  stock  for  failure  of  vendor 
to  pay  subscription.  (Falk  v.  Schmitz  etc.  Min.  Co.,  44  Wash.  612, 
87  Pac.  927.) 


273  FORMATION  OF  GENERALLY.  §  414 

Where  the  company  kept  only  stock  certificate  and  stub-book  but 
no  transfer  or  record  book,  held  company  and  others  bound  by  record 
of  stock  transfer  as  shown  by  the  record  actually  kept.  (Iverson  v. 
Bradrick,  54  Wash.  633,  104  Pac.  130.) 

§  414.     Subscriptions,  Assessments,  Sale  of  Shares,  etc. 

[§  3694,  Kem.-Bal.]  The  stockholders  of  any  corporation 
formed  under  this  chapter  may,  in  the  by-laws  of  the  com- 
pany, prescribe  the  times,  manner  and  amounts  in  which  pay- 
ments of  the  sum  subscribed  by  them  respectively,  shall  be 
made ;  but  in  case  the  same  shall  not  be  so  prescribed,  the 
trustees  shall  have  the  power  to  demand  and  call  in  from 
the  stockholders  the  sums  by  them  subscribed,  at  such  time, 
and  in  such  manner,  payments  or  installments,  as  they  may 
deem  proper.  In  all  cases  notice  of  each  assessment  shall 
be  given  to  the  stockholders  personally,  or  by  publication 
in  some  newspaper  published  in  the  county  in  which  the 
principal  place  of  business  of  the  company  is  located;  and  if 
none  be  published  in  such  county,  then  in  the  newspaper 
nearest  to  said  principal  place  of  business  in  the  state.  If 
after  such  notice  has  been  given  any  stockholders  shall  make 
default  in  the  payment  of  assessments  upon  the  shares  held 
by  him,  so  many  of  said  shares  may  be  sold  as  will  be  neces- 
sary for  the  payment  of  the  assessment  upon  all  the  shares 
held  by  him,  her  or  them.  The  sale  of  said  shares  shall  be 
made  as  prescribed  in  the  by-laws  of  the  company,  but  shall 
in  no  case  be  made  at  the  office  of  the  company.  No  sale 
shall  be  made  except  at  public  auction,  to  the  highest  bidder, 
after  a  notice  of  four  weeks,  published  as  above  directed  in 
this  section,  and  at  such  sale  the  person  who  shall  pay  the 
assessment  so  due,  together  with  the  expenses  of  advertising 
and  sale  for  the  smallest  number  of  shares,  or  portion  of  a 
share,  as  the  case  may  be,  shall  be  deemed  the  highest  bidder. 
Provided,  that  the  amount  of  the  capital  stock  of  any  bank 
incorporated  under  this  act  shall  not  be  less  than  twenty-five 
thousand  dollars,  to  be  divided  into  shares  of  one  hundred 
dollars  each,  all  of  which  shares  shall  be  subscribed,  and 
three-fifths  of  such  capital  stock  shall  be  paid  in  before  com- 
mencement of  business,  the  remainder  to  be  subject  to  the 
18 


§  414  EXISTING   CORPORATION   LAWS,    1913,  274 

call  of  the  trustees,  and  it  shall  be  the  duty  of  the  directors 
of  any  such  bank  to  file  with  their  articles  of  incorporation 
their  affidavit  that  three-fifths  of  the  capital  stock  of  such 
bank  has  been  actually  paid  in.  [Cd.  1881,  §  2430;  1  H.  C, 
§1507;  Bal.,  §4262.] 

As  to  banks,  modified'  by  Rem. -Bal.,  sec.  3317. 

Laws  of  1886,  page  84,  amending  Code  of  1881,  section  2421,  pro- 
viding forfeiture  of  stock  for  failure  to  pay  subscriptions,  does  not 
relieve  from  liability  for  unpaid  subscriptions  by  limiting  remedy  to 
forfeiture.  (Puget  Sound  &  Cbehalis  E.  Co.  v.  Ouellette,  7  Wash.  265, 
34  Pac.  929.) 

Joint  subscription  by  trustees  to  complete  subscription  enforceable 
contract.  (Hardin  v.  Sweeney,  14  Wash.  129,  44  Pac.  138;  Hardin  v. 
Mullen,  16  Wash.  647,  48  Pac.  349.) 

Part  payment  of  subscription  does  not  stop  subscribers  from  denying 
authority  of  corporation  to  sue.  (Denny  Hotel  Co.  v.  Gilmore,  6  Wash. 
152,  32  Pac.  1004.) 

Subscribers  to  stock  of  company  which  has  begun  business  before  all 
its  stock  is  subscribed  not  liable  on  the  subscriptions  unless  they  have 
by  their  acts  and  conduct  waived  the  conditions.  Part  payment  of  sub- 
scriptions without  notice  not  a  waiver.  (Birge  v.  Browning,  11  Wash. 
249,  39  Pac.  643.) 

A  subscription  to  capital  stock  not  enforceable  until  the  entire  capital 
stock  is  subscribed.  (Denny  Hotel  Co.  v.  Schram,  6  Wash.  134,  32  Pac. 
1002;  Denny  Hotel  Co.  v.  Gilmore,  6  Wash.  152,  32  Pac.  1004;  Elderkin 
V.  Peterson,  8  Wash.  674,  36  Pac.  1089.) 

Property  may  be  taken  in  payment  for  a  stock  subscription.  (Man- 
hattan Trust  Co.  V.  Seattle  Coal  &  Iron  Co.,  16  Wash.  499,  48  Pac.  333, 
737;  Kroenert  v.  Johnston,  19  Wash.  96,  52  Pac.  605.) 

Property  taken  in  payment  of  stock  must  be  fairly  valued  and  stock- 
holder's valuation  is  not  conclusive.  (Dunlap  v.  Ranch,  24  Wash.  620, 
64  Pac.  807;  Manhattan  Trust  Co.  v.  Seattle  Coal  &  Iron  Co.,  19  Wash. 
493,  53  Pac.  951.) 

"Calls"  and  "assessments"  are  used  interchangeably.  (Stewart  v. 
Walla  Walla  etc.  Pub.  Co.,  1  Wash.  521,  20  Pac.  605.) 

Notice  of  assessment  must  be  given  before  suit  brought  on  unpaid 
subscription.     (Elderkin  v.  Peterson,  8  Wash.  674,  36  Pac.  1089.) 

A  prior  call  unnecessary  where  the  action  is  by  creditors  of  an  in- 
solvent corporation  or  after  an  assignment  for  the  benefit  of  creditors. 
(Adamant  Mfg.  Co.  v.  Wallace,  16  Wash.  614,  48  Pac.  415;  McKay  v. 
Elwood,  12  Wash.  579,  41  Pac.  919.) 

A  subscription  may  be  enforced  as  a  contract  for  payment  of  money 
and  the  shares  sold  under  execution.  (Code  of  1881,  sees.  2421,  2430; 
Puget  Sound  &  C.  R.  R.  Co.  v.  Ouellette,  7  Wash,  265,  34  Pac.  929; 
Dearborn  v.  Washington  Sav.  Bank,  18  Wash.  8,  50  Pac  575.) 


275  FORMATION  OF  GENERALLY.  §  414 

Complaint  to  recover  stock  subscription  not  demurrable  for  failure  to 
allege  entire  stock  subscribed.  (McKay  v.  Elwood,  12  Wash.  579,  41 
Pac.  919.) 

Stock  must  be  paid  for  in  money  or  money's  worth.  (Turner  v. 
Bailey,  12  Wash.  634,  42  Pac.  115;  Adamant  Mfg.  Co.  v.  Wallace,  16 
Wash.  614,  48  Pac.  415.) 

Under  the  provisions  of  1  Hill's  Code,  section  1507,  shares  of  stock 
cannot  be  sold  for  nonpayment  of  assessments  unless  so  provided  in  the 
by-laws.  (Dearborn  v.  Washington  Savings  Bank,  18  Wash.  8,  50 
Pac.  575.) 

Where  fully  paid  stock  is  issued  for  property,  there  must  be  actual 
fraud  to  enable  creditors  to  call  stockholders  to  account  as  for  unpaid 
subscriptions.     (Turner  v.  Bailey,  12  Wash.  634,  42  Pac.  115.) 

A  purchase  of  stock  may  be  rescinded  for  fraud  and  the  defrauded 
stockholder  is  not  estopped  by  attending  a  stockholders'  meeting  and 
voting  the  stock.      (Landis  v.  Wintermute,  40  Wash.  673,  82  Pac.  1000.) 

In  case  of  pledge  of  stock,  the  corporation  must  proceed  against  the 
pledgor  for  any  unpaid  subscriptions,  and  the  corporation  transfers  the 
stock  without  requiring  the  production  of  the  outstanding  certificate  at 
its  peril.  (Brown  v.  Union  Sav.  &  Loan  Assn.,  28  Wash.  657,  69  Pac. 
383.) 

Subscriber  to  stock  of  corporation  who  has  bona  fide  transferred  his 
shares,  the  transfer  being  registered,  is  not  liable  for  an  assessment 
afterward  made.  (Stewart  v.  Walla  Walla  etc.  Pub.  Co.,  1  Wash.  521, 
20  Pac.  605.) 

Corporations  have  no  common-law  lien  upon  their  stock  for  the  debts 
of  their  stockholders,  nor  does  the  code  give  lien — 1  Hill's  Code,  sec. 
1507;  Bal.  Code,  see.  4262.  (Dearborn  v.  Washington  Sav.  Bank,  18 
Wash.  8,  50  Pac.  575.) 

Liability  for  unpaid  subscriptions,  under  Code  of  1881,  section  2434, 
is  declaratory  of  the  common  law  securing  a  trust  fund  for  creditors 
that  can  be  reached  only  by  an  equitable  action.  (Burch  v.  Taylor, 
1  Wash.  245,  24  Pac.  438.) 

.An  action  by  a  creditor  to  enforce  unpaid  subscriptions  is  in  the 
nature  of  a  creditor's  bill,  and  it  is  unnecessary  first  to  obtain  judg- 
ment against  the  company  where  so  doing  would  be  simply  futile  and 
the  cause  of  action  accrues  at  the  time  the  corporation  is  declared  insol- 
vent.    (Chilberg  v.  Siebenbaum,  41  Wash.  663,  84  Pac.  598.) 

Stock  subscriptions  must  be  fully  paid  in  property  or  cash,  irre- 
spective of  understandings  among  the  stockholders.  (Adamant  Mfg. 
Co.  V.  Wallace,  16  Wash.  614,  48  Pac.  415.) 

When  stock  is  fully  paid  by  property  at  its  fair  valuation,  the  stock- 
holders do  not  become  subsequently  liable  by  the  subsequent  depreciation 
of  the  property.     (Turner  v.  Bailey,  12  Wash.  634,  42  Pac.  115.) 

The  fact  that  a  stock  certificate  purports  on  its  face  to  be  fully  paid 
is  not  conclusive.     (Elderkin  v.  Peterson,  8  Wash.  674,  36  Pac.  1089.) 


§  414  EXISTING    CORPORATION   LAWS,    1913.  276 

Receiver  of  insolvent  corporation  may  enforce  all  the  rights  that 
the  creditors  have.     (Cole  v.  Satsop  R.  Co.,  9  Wash.  487,  37  Pac.  700.) 

Where  a  subscription  to  stock  is  made  by  a  "trustee"  or  agent  for 
others,  it  may  be  enforced  against  the  real  parties.  (Cole  v.  Satsop, 
9  Wash.  487,  37  Pac.  700.) 

A  stockholder  owning  a  majority  of  stock  by  way  of  security  for 
advances  made  by  him  to  the  company  is  nevertheless  a  stockholder 
to  answer  obligations  of  creditors.  (Mitchell  v.  Jordan,  36  Wash.  645, 
79  Pac.  311.) 

In  an  action  by  a  receiver  of  an  insolvent  company,  defendant  may 
set  off  contract  claim  against  the  company  existing  at  time  of  com- 
mencement of  action.     (Sheafe  v.  Hastie,  16  Wash.  563,  48  Pac.  246.) 

Notice  of  assessment  required  by  1  Hill's  Code,  section  1507  (1 
Bal.  Code,  sec.  4262),  must  be  given  when  assessment  made  by  court 
as  well  as  otherwise.  (Elderkin  v.  Peterson,  8  Wash.  674,  36  Pac. 
10S9.) 

Stockholders  cannot  escape  liability  to  creditors  for  unpaid  sub- 
scriptions on  the  ground  that  part  of  the  stock  was  illegally  sub- 
scribed.    (Cole  V.  Satsop  R.  Co.,  9  Wash.  487,  37  Pac.  700.) 

That  all  the  capital  stock  was  never  subscribed  is  a  good  defense 
to  an  action  on  a  stock  subscription.  (Birge  v.  Browning,  11  Wash. 
249,  39  Pac.  643.) 

That  no  call  was  made  prior  to  an  assignment  to  a  trustee  is  no 
defense  to  an  action  by  a  trustee  to  enforce  unpaid  subscriptions. 
(McKay  v.  Elwood,  12  Wash.  579,  41  Pac.  919.) 

A  judgment  for  contingent  liability  over  the  par  value  of  stock 
is  no  bar  to  action  for  unpaid  subscriptions.  (Barto  v.  Nix,  15  Wash. 
563,  46  Pac.  1033.) 

Complaint  in  action  for  unpaid  subscriptions  failing  to  allege  de- 
fendant had  notice  of  the  call  for  assessments  is  demurrable  under 
1  Hill's  Code,  section  1507  (1  Bal.  Code,  sec.  4262).  (Elderkin  v. 
Peterson,  8  Wash.  674,  36  Pac.  1089.) 

Dividends  are  to  be  declared  on  unpaid  as  well  as  paid-up  stock  in 
compliance  with  by-laws.  (Gellerman  v.  Atlas  Foundry  &  Machine 
Co.,  45  Wash.  114,  87  Pac.  1059.) 

Agreement  that  a  stockholder  was  to  receive  his  stock  "free  of 
assessment"  does  not  mean  free  from  payment  therefor.  (Cunning- 
ham V.  Independence  Consol.  Min.  Co.,  58  Wash.  371,  108  Pac.  956.) 

Change  in  name  of  company  does  not  release  subscribers  to  stock. 
(Cox  V.  IMckie,  48  Wash.  264,  93  Pac.  523.) 

Stock  issued  to  promoters  for  property  not  canceled  in  absence 
of  actual  fraud.  (Inland  Nursery  &  Floral  Co.  v.  Rice,  57  Wash. 
67,  106  Pac.  499.) 

Where  a  receiver  of  an  insolvent  corporation  sues  for  unpaid  sub- 
Bcriptions,  it  is  no  defense  that  tbe  stockholder  took  the  stock  bona 


277  FORMATION   OF    GENERALLY.  §§  415-417 

fide,  believing  it  fully  paid.     (Cox  v.  Dickie,  48  Wash.  264,  93  Pac. 
523.) 

A  promoter's  contract  binding  the  corporation  inequitably  not  en- 
forceable. (Hampton  v.  Buchanan,  51  Wash.  155,  98  Pac.  374;  Man- 
gold V,  Adrian  Irr.  Co.,  60  Wash.  286,  111  Pac,  173.) 

§  415.    Executor  may  Vote  Stock. 

[§  3695,  Rem.-Bal.]  Whenever  any  stock  is  held  by  a 
person  as  executor,  administrator,  guardian,  or  trustee,  he 
shall  represent  such  stock  at  all  meetings  of  the  company, 
and  may  vote  accordingly  as  a  stockholder.  [Laws  1873, 
§  11,  p.  402;  Cd.  1881,  §  2431;  1  H.  C,  §  1508;  Bal.,  §  4263.] 

§  416.     Pledge  of  Stock,  Effect  of. 

[§  3696,  Rem.-Bal.]  Any  stockholder  may  pledge  his 
stock  by  a  delivery  of  the  certificates  or  other  evidence  of  his 
interest,  but  may,  nevertheless,  represent  the  same  at  all  meet- 
ings, and  vote  as  a  stockholder.  [Laws  1873,  §  12,  p.  402 ; 
Cd.  1881,  §  2432 ;  1  H.  C,  §  1509 ;  Bal.,  §  4264.] 

§  417.  Dividends — Capital  Stock,  How  Reduced — Liabili- 
ties of  Trustees. 
[§  3697,  Rem.-Bal.]  It  shall  not  be  lawful  for  the  trus- 
tees to  make  any  dividend  except  from  the  net  profits  arising 
from  the  business  of  the  corporation,  nor  divide,  withdraw, 
or  in  any  way  pay  to  the  stockholders,  or  any  of  them,  any 
part  of  the  capital  stock  of  the  company,  nor  to  reduce  the 
capital  stock  of  the  company  unless  in  the  manner  prescribed 
in  this  chapter,  or  the  articles  of  incorporation  or  by-laws; 
and  in  case  of  any  violation  of  the  provisions  of  this  section, 
the  trustees  under  whose  administration  the  same  may  have 
happened,  except  those  who  may  have  caused  their  dissent 
therefrom  to  be  entered  at  large  on  the  minutes  of  the  board 
of  directors  at  the  time,  or  were  not  present  when  the  same 
did  happen,  shall,  in  their  individual  or  private  capacities,  be 
jointly  or  severally  liable  to  the  corporation,  and  the  cred- 
itors thereof  in  the  event  of  its  dissolution,  to  the  full  amount 
so  divided,  or  reduced,  or  paid  out:  Provided,  that  this  sec- 
tion shall  not  be  construed  to  prevent  a  division  and  distribu- 


§  418  EXISTING    CORPORATION   LAWS,    1913,  278 

tion  of  the  capital  stock  of  the  company,  which  shall  remain 
after  the  payment  of  all  its  debts  upon  the  dissolution  of  the 
corporation  or  the  expiration  of  its  charter.  [Laws  1873, 
§  13,  p.  402;  Cd.  1881,  §  2433;  1  H.  C,  §  1510;  Bal.,  §  4265.] 

A  by-law  providing  for  certain  dividends  has  force  of  a  contract. 
(Seattle  Trust  Co.  v.  Pittner,  18  Wash.  401,  51  Pac.  1048.) 

Under  Ballinger's  Code,  section  4265,  it  is  unlawful  to  reduce  the 
capital  stock  by  paying  any  portion  of  it  to  the  stockholders.  (Tait 
V.  Pigott,  32  Wash.  344,  73  Pac.  364,  38  Wash.  59,  80  Pac.  172;  Tacoma 
Ledger  Co.  v.  Western  Home  Bldg.  Co.,  37  Wash.  467,  79  Pac.  992.) 

Stockholder  has  no  right  to  profits  in  the  treasury  of  the  company 
until  declared  as  dividends.  (Seattle  Trust  Co.  v.  Pittner,  18  Wash. 
401,  51  Pac.  1048.) 

Where  the  property  of  an  insolvent  company  has  been  transferred 
to  a  director  to  avoid  claims  of  creditors,  the  sale  may  be  set  aside 
by  a  creditor.  (Potvin  v.  Denny  Hotel  Co.,  26  Wash,  309,  66  Pac. 
376.) 

Eecord  of  by-law  as  to  past  dividends  cannot  be  changed  after 
purchase  of  stock  to  detriment  of  such  purchaser.  (Gellerman  v. 
Atlas  Foundry  &  Machine  Co.,  45  Wash.  114,  87  Pac.  1059.) 

Dividends  are  to  be  declared  on  unpaid  as  well  as  paid-up  stock 
in  compliance  with  by-laws.  (Gellerman  v.  Atlas  Foundry  &  Machine 
Co.,  45  Wash.  114,  87  Pac.  1059.) 

Trustee's  individual  liability  noticed.  (American  Radiator  Co.  v. 
Kinnear,  56  Wash.  210,  214,  105  Pac.  630,  631.) 

§  418.     Power  to  Issue  Negotiable  Paper. 

[§  3698,  Rem.-Bal.]  No  corporation  organized  under  this 
chapter  shall,  by  any  implication  or  construction,  be  deemed 
to  possess  the  power  of  issuing  bills,  notes,  or  other  evidence 
of  debt  for  circulation  as  money,  except  bonds  by  railroad 
companies,  which  shall  at  no  time  exceed  double  the  amount 
of  paid-up  stock  issued  by  said  company.  Each  and  every 
stockholder  shall  be  personally  liable  to  the  creditors  of  the 
company,  to  the  amount  of  what  remains  unpaid  upon  his 
subscription  to  the  capital  stock,  and  not  otherwise :  Pro- 
vided, that  the  stockholders  of  every  bank  incorporated 
under  this  act  or  the  territory  of  Washington  shall  be  held 
individually  responsible,  equally  and  ratably,  and  not  one 
for  another,  for  all  contracts,  debts  and  engagements  of  such 
association  accruing  while  they  remain  such  stockholders, 


279  FORMATION  OF  GENERALLY.  §  418 

to  the  extent  of  the  amount  of  their  stock  therein  at  the 
par  value  thereof  in  addition  to  the  amount  invested  in 
such  shares,  and  all  such  banking  corporations  shall  file,  on 
the  first  Monday  in  June,  each  year,  with  the  state  auditor, 
a  report  sworn  to  by  its  president,  vice-president,  or 
cashier,  of  the  resources  and  liabilities,  stating  the  amount  of 
deposits,  the  aggregate  of  loans  and  the  amount  upon  each 
class  of  securities,  the  names  and  residences  of  the  share- 
holders and  number  of  their  shares,  the  directors  or  officers 
for  the  time  being,  and  any  other  matters  affecting  the 
safety  of  their  deposits  or  the  interest  of  their  creditors; 
and  such  banking  corporations  shall  have  power  to  exercise, 
by  its  board,  of  trustees,  or  duly  authorized  officers  or  agents, 
all  such  incidental  powers  as  shall  be  necessary  to  carry  on 
the  business  of  banking,  by  discounting  and  negotiating 
promissory  notes,  drafts,  bills  of  exchange,  and  other  evi- 
dence of  debt;  by  receiving  deposits,  buying  and  selling  ex- 
change, coin  and  bullion,  by  loaning  money  on  real  estate 
or  personal  security;  to  accept  and  execute  all  trusts,  fidu- 
ciary or  otherwise,  as  may  be  committed  to  such  bank  or 
corporation,  by  any  person,  persons  or  corporation,  or  by 
the  order  or  direction  of  any  court,  and  may  do  any  other 
business  pertaining  to  banking.  [See  Laws  1911,  c.  80.] 
Provided  further,  that  the  provisions  of  this  section  shall 
not  apply  to  the  debentures  or  bonds  of  any  company  duly 
incorporated  under  the  provisions  of  this  chapter,  the  pay- 
ment of  which  debentures  or  bonds  shall  be  secured  by  an 
actual  transfer  of  real  estate  securities  for  the  benefit  and 
protection  of  purchasers  of  said  debentures  or  bonds,  such 
securities  to  be  at  least  equal  in  amount  to  the  par  value  of 
such  bonds  or  debentures,  and  to  be  first  liens  upon  the  un- 
encumbered real  estate  vv'orth  at  least  twice  the  amount 
loaned  thereon :  Provided  further,  however,  that  such  issue 
of  debentures  or  bonds  shall  in  no  case  exceed  ten  times  the 
capital  stock  of  the  issuing  corporation.  [Laws  1888,  §  1, 
p.  65;  Cd.  1881,  §  2434;  1  H.  C,  §  1511;  Bal,  §  4266.] 

Coal  mining  is  not  within  section  34,  and  where  property  in  a  coal 
mine  is  knowingly  taken  by  the  company  at  overvaluation  for  stock, 


§  419  EXISTING    CORPORATION   LAWS,    1913.  280 

stockholder  is  liable  to   creditor  for  amount   unpaid  on  subscription. 
(Davies  v.  Ball,  64  Wash.  292,  116  Pac.  833.) 

§  419.  Liability  of  Executor,  etc.,  Holding  Stock  as  Col- 
lateral. "^ 
[§  3700,  Rem.-Bal.]  No  person  holding  stock  as  executor, 
administrator,  guardian,  or  trustee,  or  holding  it  as  collateral 
security  or  in  pledge,  shall  be  personally  subject  to  any  lia- 
bility as  a  stockholder  of  the  company;  but  the  person  pledg- 
ing the  stock  shall  be  considered  as  holding  the  same,  and 
shall  be  liable  as  a  stockholder,  and  the  estate  and  funds 
in  the  hands  of  the  executor,  administrator,  or  guardian  or 
trustee  shall  be  liable  in  like  manner  and  to  the  same  extent 
as  the  testator  or  intestate,  or  the  ward  or  person  interested 
in  the  trust  fund  would  have  been  if  he  or  she  had  been  living 
and  competent  to  act  and  hold  the  stock  in  his  or  her  name. 
[Laws  1873,  §  15,  p.  403 ;  Cd.  1881,  §  2435 ;  1  H.  C,  §  1512 ; 
Bal.,  §  4268.] 

In  case  of  pledge  of  stock,  the  corporation  must  proceed  against 
the  pledgor  for  any  unpaid  subscriptions,  and  the  corporation  trans- 
fers the  stock  without  requiring  the  production  of  the  outstanding 
certificate  at  its  peril.  (Brown  v.  Union  Sav.  &  Loan  Assn.,  28  Wash. 
657,  69  Pac.  383.) 

Interest  of  pledgee  of  stock  cannot  be  divested  by  execution  sale 
against  pledgor  or  owner.  (Port  Townsend  Nat.  Bank  v.  Port  Town- 
send  etc.  Co.,  6  Wash.  597,  34  Pac.  155.) 

The  remedy  of  the  pledgee  is  to  foreclose  the  pledge.  (Port 
Townsend  Nat.  Bank  v.  Port  Townsend  etc.  Co.,  6  Wash.  597,  34  Pac. 
155;  American  Bonding  etc.  Co.  v.  Pacific  Brewing  Co.,  34  Wash.  10, 
74  Pac.  826.) 

Pledgor  of  stock  entitled  to  vote  it.  (Spokane  v.  Amsterdamsch 
Trustees  Kantoor,  22  Wash.  172,  60  Pac.  141.) 

Pledgee  of  stock  who  has  reduced  his  lien  to  judgment  not  entitled 
to  possession  of  the  certificate  of  stock,  which  should  remain  with  the 
clerk  of  court  until  redemption  or  sale.  (American  Bonding  Co.  v. 
Loeb,  50  Wash.  104,  96  Pac.  692.) 

Pledgee  of  stock  standing  in  his  name  as  owner  on  the  books  of 
the  company  not  liable  for  unpaid  subscriptions.  (Johnstone  v.  Black, 
59  Wash.  144,  109  Pac.  367.) 

Stockholder  of  insolvent  corporation  who  transferred  his  stock  while 
the  company  was  solvent  relieved  of  liability.  (Iverson  v.  Bradrick, 
54  Wash.  633,  104  Pac.  130.) 


281  FORMATION  OF  GENERALLY.  §  420 

§  420.     Record  of  Stockholders — Inspection. 

[§.3701,  Rem.-Bal]  It  shall  be  the  duty  of  the  trustees 
of  every  company  incorporated  under  this  chapter  to  keep  a 
book  containing  the  names  of  all  persons,  alphabetically  ar- 
ranged, who  are  or  shall  be  stockholders  of  the  corporation, 
and  showing  the  number  of  shares  of  stock  held  by  them  re- 
spectively, and  the  time  when  they  became  the  owners  of 
such  shares,  which  book  during  the  usual  business  hours  of 
the  day,  on  every  day  excepting  Sunday  and  the  legal  holidays, 
shall  be  open  for  the  inspection  of  stockholders  and  creditors 
of  the  company,  at  the  office  or  principal  place  of  business 
of  the  company;  and  any  stockholder  or  creditor  of  the  com- 
pany shall  have  the  right  to  make  extracts  from  such  book, 
or  to  demand  and  receive  from  the  clerk  or  other  officer 
having  the  charge  of  such  book  a  certified  copy  of  any  entry 
therein,  or  to  demand  and  receive  from  any  clerk  or  officer 
a  certified  copy  of  any  paper  placed  on  file  in  the  office  of 
the  company ;  and  such  book  and  certified  copy  shall  be  pre- 
sumptive evidence  of  the  fact  therein  stated  in  any  action  or 
proceeding  against  the  company  or  any  one  or  more  of  the 
stockholders.  [Laws  1873,  §16,  p.  403;  Cd.  1881,  §2436; 
1  H.  C,  §1513;  Bal.,  §4269.] 

A  stockholder  may  enforce  his  right  to  inspect  the  books  by  man- 
damus proceedings,  and  the  burden  of  showing  that  he  is  not  pro- 
ceeding in  good  faith  is  on  the  officers  of  the  company.  (State  ex 
rel.  Weinberg  v.  Pacific  Brewing  &  Malting  Co.,  21  Wash.  451,  58 
Pac.  584.) 

A  stockholder  dealing  with  his  corporation  through  an  agent  of  the 
corporation  is  presumed  to  know  the  scope  of  the  agent's  authority. 
(Hardin  v.  Sweeney,  14  Wash.  129,  44  Pac.  138.) 

Remington  and  Ballinger's  Code,  sections  3701,  3702,  providing  a 
penalty  for  failure  to  keep  stock  books  open  to  inspection,  is  penal 
and  construed  strictly.  (Brown  v.  Kildea,  58  Wash.  184,  108  Pac. 
452,  1135.) 

For  inspection  of  books  and  papers  of  company,  demand  must  be 
made  by  party  having  right  to  inspect  "named  book  or  designated 
paper."  General  demand  to  inspect  "books  and  papers"  not  suffi- 
cient.    (Brown  v.  Kildea,  58  Wash.  184,  108  Pac.  452,  1135.) 

Where  company  kept  only  stock  certificate  and  stock  book,  but  no 
transfer  or  record  book,  held  company  and   others  bound   by  record 


§§421,422      EXISTING    CORPORATION   LAWS,    1913.  282 

of  stock  transfer  as  shown  by  the  record  actually  kept.     (Iverson  v. 
Bradrick,  54  Wash.  633,  104  Pac.   130.) 

To  subject  officer  to  penalty  there  must  be  demand  by  person  inter- 
ested for  designated  papers.  (Brown  v.  Kildea,  58  "Wash.  184,  108 
Pac.  452,  1135.) 

§  421.    False  Entries — Misdemeanors. 

[§  3702.  Rem.-Bal.]  If  at  any  time  the  clerk  or  other 
officer  having  charge  of  such  book  shall  make  any  false 
entry,  or  neglect  to  make  any  proper  entry  therein,  or  hav- 
ing the  charge  of  any  papers  of  the  company  shall  refuse  or 
neglect  to  exhibit  the  same,  or  allow  the  same  to  be  inspected 
or  extracts  to  be  taken  therefrom,  or  to  give  a  certified  copy 
of  any  entry,  as  provided  in  the  preceding  section,  he  shall 
be  deemed  guilty  of  a  misdemeanor,  and  shall  forfeit  and 
pay  to  the  injured  party  a  penalty  of  not  less  than  one  hun- 
dred dollars  nor  more  than  one  thousand  dollars,  and  all 
damages  resulting  therefrom,  to  be  recovered  in  any  action 
of  debt  in  any  court  having  competent  jurisdiction;  and  for 
neglecting  to  keep  such  book  for  inspection  as  aforesaid,  the 
corporation  shall  forfeit  to  the  people  the  sum  of  one  hun- 
dred dollars  for  every  day  it  shall  so  neglect,  to  be  sued  for 
and  recovered  in  the  name  of  the  people  in  the  superior  court 
of  the  county  in  which  the  principal  place  of  business  of  the 
corporation  is  located.  [Laws  1873,  §  17,  p.  404;  Cd.  1881, 
§  2437;  1  H.  C,  §  1514;  Bal.,  §  4270.] 

Corporations  entitled  to  have  spurious  stock  fraudulently  issued  by 
the  secretary  canceled.  (Dreyfus  Min.  Co.  v.  Willard,  46  Wash.  345, 
89  Pac.  935.) 

To  subject  an  officer  to  penalty  there  must  be  demand  by  the  person 
interested  for  designated  papers.  (Brown  v.  Kildea,  58  Wash.  184, 
108  Pac.  452,  1135.) 

§  422.  Right  of  Stockholder  in  Mining  Companies  to  In- 
spect Property. 
[§  7348,  Rem.-Bal.]  Any  owner  of  stock  to  the  amount  of 
one  thousand  shares,  in  any  corporation  doing  business  under 
the  laws  of  the  state  of  Washington  for  the  purposes  of 
mining,  shall  at  all  hours  of  business  or  labor  on  or  about 
the  premises  or  property  of  such  corporation,  have  the  right 


283  FORMATION  OF  GENERALLY.  §§  423-424 

to  enter  upon  such  property  and  examine  the  same,  either 
on  the  surface  or  underground.  And  it  is  hereby  made  the 
duty  of  any  and  all  officers,  managers,  agents,  superintend- 
ents, or  persons  in  charge,  to  allow  any  such  stockholder  to 
enter  upon  and  examine  any  of  the  property  of  such  corpora- 
tion at  any  time  during  the  hours  of  business  or  labor;  and 
the  presentation  of  certificates  of  stock  in  the  corporation 
of  the  amount  of  one  thousand  shares,  to  the  officer  or  per- 
son in  charge,  shall  be  prima  facie  evidence  of  ownership 
and  right  to  enter  upon  or  into,  and  make  examinations  of 
the  property  of  the  corporation.     [Laws  1901,  §  1,  p.  258.] 

§  423.    Liability  for  Refusal  to  Comply. 

[§  7349,  Rem.-Bal.]  Any  violation  of  any  of  the  provi- 
sions of  this  act  by  any  officer  or  agent  of  such  corporation 
shall  constitute  a  misdemeanor,  and  upon  conviction  thereof 
every  such  officer  or  agent  shall  be  fined  in  a  sum  not  greater 
than  two  hundred  dollars  for  each  offense.  [Laws  1901, 
§  2,  p.  259.] 

§  423a.     Penalty  for  Failure  to  Furnish  Statement. 

[§  7350,  Rem.-Bal.]  In  case  such  corporation  shall  fail 
and  neglect  to  furnish  the  statement  provided  for  in  section 
1  [Rem.-Bal.,  §  7348],  within  sixty  days  from  and  after  such 
demand,  the  franchise  of  said  corporation  may  be  annulled 
in  any  action  brought  by  such  stockholder  in  the  name  of 
the  state  of  Washington,  in  any  superior  court  in  the  county 
in  which  said  mining  property  is  situated  or  in  which  the 
principal  place  of  business  of  the  corporation  may  be  located. 
[Laws  1901,  p.  259,  §  3.] 

§  424.    Increase  or  Decrease  of  Capital  Stock. 

[§  3704,  Rem.-Bal.]  Any  company  incorporated  under 
this  chapter  may,  by  complying  with  the  provisions  herein 
contained,  increase  or  diminish  its  capital  stock  to  any 
amount  which  may  be  deemed  sufficient  and  proper  for  the 
purposes  of  the  corporation  ;  but  before  any  corporation  shall 
be  entitled  to  diminish  the  amount  of  its  capital  stock,  if 
the  amount  of  its  debts  and  liabilities  shall  exceed  the  sum 


§  425  EXISTING   CORPORATION  LAWS,   1913.  284 

to  which  the  capital  is  proposed  to  be  diminished,  such 
amount  shall  be  satisfied  and  reduced  so  as  not  to  exceed 
the  diminished  amount  of  the  capital:  Provided,  that  the 
deposits  in  any  trust  company  or  banking  corporation  shall 
not  be  included  in  ascertaining  the  debts  and  liabilities  of 
such  trust  company  or  banking  corporation  for  the  purposes 
of  this  section :  Provided,  further,  that  this  act  shall  not  re- 
lieve such  trust  company  or  banking  corporation  or  the 
stockholders  of  any  such  trust  company  or  banking  corpora- 
tion from  liability,  although  contingent,  or  remote,  incurred 
or  entered  into  by  such  trust  company  or  banking  corpora- 
tion prior  to  the  reduction  of  its  capital,  including  liability 
for  deposits:  Provided  further,  that  before  any  banking 
corporation,  or  trust  company,  can  reduce  its  capitalization, 
a  notice,  in  writing,  must  be  mailed  to  the  last  known  post- 
office  address  of  its  depositors  setting  forth  the  fact  that  the 
said  banking  corporation,  or  trust  company,  intends  to  de- 
crease its  capitalization,  showing  the  amount  of  its  capitaliza- 
tion and  the  amount  to  which  it  intends  to  decrease  same; 
and  proof  of  the  mailing  of  such  notices  shall  be  made  by 
affidavit  of  the  party  mailing  the  same,  showing  the  names 
and  addresses  of  the  persons  to  whom  mailed.  [Laws  1899, 
§  1,  p.  174.  See  §§  3326,  3697,  Rem.-Bal. ;  Cd.  1881,  §  2438; 
IH.  C,  §1515;Bal.,  §4271.] 

§  425.    Notice  of  Meeting  Called  to  Increase  or  Diminish 
>C  Stock. 

[§  3705,  Rem.-Bal.]  Whenever  it  is  desired  to  increase 
or  diminish  the  amount  of  capital  stock,  a  meeting  of  the 
stockholders  shall  be  called,  by  a  notice  signed  by  at  least 
a  majority  of  the  trustees,  and  published  at  least  eight  weeks 
in  some  newspaper  published  in  the  county  where  the  prin- 
cipal place  of  business  of  the  company  is  located,  or  if  no 
newspaper  is  published  in  the  county,  then  the  newspaper 
nearest  thereto  in  the  state,  which  notice  shall  specify  the 
object  of  the  meeting,  the  time  and  place  where  it  is  to  be 
held,  and  the  amount  to  which  it  is  proposed  to  increase  or 
diminish  the  capital,  and  a  vote  of    two-thirds  of  all  the 


285  FORMATION    OF   GENERALLY.  §§426,427 

shares  of  the  stock  shall  be  necessary  to  increase  or  diminish 
the  amount  of  the  capital  stock.  [Laws  1873,  §  19,  p.  404; 
Cd.  1881,  §  2439 ;  1  H.  C,  §  1516 ;  Bal.,  §  4272.] 

§  426.  Certificate  to  be  Made,  Filed,  etc. — Amount  to  be 
Specified. 
[§  3706,  Rem.-Bal.]  If,  at  a  meeting  so  called,  a  sufficient 
number  of  votes  have  been  given  in  favor  of  increasing  or 
diminishing  the  amount  of  capital,  a  certificate  of  the  pro- 
ceedings showing  a  compliance  with  these  provisions,  the 
amount  of  capital  actually  paid  in,  the  whole  amount  of 
debts  and  liabilities  of  the  company  and  the  amount  to  which 
the  capital  stock  is  to  be  increased  or  diminished,  shall  be 
made  out,  and  signed,  and  verified,  by  the  affidavit  of  the 
chairman  and  secretary  of  the  meeting,  certified  to  by  a  ma- 
jority of  the  trustees,  and  filed  as  required  by  section  2 
[§  3679,  Rem.-Bal.]  and  when  so  filed,  the  capital  stock  of 
the  corporation  shall  be  increased  or  diminished  to  the 
amount  specified  in  the  certificate.  [Laws  1873,  sec.  20,  p. 
405;  Cd.  1881,  §  2440;  1  H.  C,  §  1517;  Bal.,  §  4273.] 

§  427.     Powers  of  Trustees  upon  Dissolution  of  Corporation. 

[§  3707,  Rem.-Bal.]  Upon  the  dissolution  of  any  corpora- 
tion formed  under  the  provisions  of  this  chapter,  the  trus- 
tees at  the  time  of  the  dissolution  shall  be  trustees  of  the 
creditors  and  stockholders  of  the  corporation  dissolved,  and 
shall  have  full  power  and  authority  to  sue  for  and  recover 
the  debts  and  property  of  the  corporation  by  the  name  of 
the  trustees  of  such  corporation,  collect  and  pay  outstanding 
debts,  settle  all  its  affairs,  and  divide  among  the  stockholders 
the  money  and  other  property  that  shall  remain  after  the 
payment  of  the  debts  and  necessary  expenses.  [Laws  1873 
§  21,  p.  405;  Cd.  1881,  §  2441;  1  H.  C,  §  1518;  Bal.,  §  4274.]' 

Section  applicable  to  voluntary  dissolutions.  (Conlon  v.  Oudin,  49 
Wash.  240.) 

After  a  corporation  has  ceased  to  do  business,  a  trustee  having 
ceased  to  be  such  is  no  longer  in  a  fiduciary  position,  and  may  pur- 
chase outstanding  obligations  of  the  corporation  and  enforce  them 
for  his  own  benefit.     (Stanton  v.  Gilpin,  38  Wash.  191,  80  Pac.  290.) 


X 


§  428  EXISTING    CORPORATION   LAWS,    1913.  286 

After  a  corporation  has  ceased  to  do  business  and  a  trustee  and 
director  has  ceased  to  be  such,  service  on  such  person  is  not  service 
on  the  corporation  binding  on  other  stockholders.      (Stanton  v.  Gilpin, 

38  Wash.  191,  80  Pac.  290.) 

A  trustee,  long  after  the  corporation  has  ceased  doing  business,  may 
purchase  notes  and  judgments  against  the  company.  (Stanton  v. 
Gilpin,  38  Wash.  191,  80  Pac.  290.) 

Mere  fact  that  indebtedness  exceeds  assets  no  proof  of  insolvency 
of  corporation.  (Brooks  v.  Skookum  Mfg.  Co.,  9  Wash.  80,  37  Pac. 
284.) 

Sufficiency  of  evidence  of  insolvency  in  particular  cases.  (Smith 
v.  Hopkins,  10  Wash.  77,  38  Pac.  854;  Conover  v.  Hull,  10  Wash.  673, 

39  Pac.  166;  State  ex  rel.  Jenkins  v.  Equitable  Indem.  Assn.,  18  Wash. 
514,  52  Pac.  234.) 

Subsequent  insolvency  does  not  affect  prior  transaction  valid  when 
made.  (Bank  of  California  v.  Puget  Sound  Loan  etc.  Co.,  20  Wash. 
636,  56  Pac.  395.) 

Code  of  1881,  chapter  143,  applicable  to  discharge  of  insolvent 
debtor,  does  not  apply  to  corporations.  (Nyman  v.  Berry,  3  Wash. 
734,   29  Pac.   557.) 

Purchase  money  mortgage  not  fraudulent  as  to  creditors.  (Vin- 
cent v.  Snoqualmie  Mill  Co.,  7  Wash.  566,  35  Pac.  396.) 

Trustees  act  as  trustees  for  stockholders  and  creditors  to  exclusion 
of  receiver  only  in  ease  of  petition,  under  section  4275  of  Ballinger's 
Code.  (New  York  Nat.  Bank  v.  Met.  Sav.  Bank,  28  Wash.  553,  68 
Pac.  905.) 

§  428.     Dissolution  Proceedings. 

[§3708,  Rem.-Bal.]  Any  corporation  formed  under  this 
chapter  may  dissolve  and  disincorporate  itself  by  presenting 
to  the  superior  judge  of  the  county  in  which  the  office  of  the 
company  is  located  a  petition  to  that  effect,  accompanied 
by  a  certificate  of  its  proper  officers,  and  setting  forth  that 
at  a  meeting  of  the  stockholders,  called  for  the  purpose,  it 
was  decided,  by  a  vote  of  two-thirds  of  all  the  stockholders, 
to  disincorporate  and  dissolve  the  corporation.  Notice  of 
the  application  shall  then  be  given  by  the  clerk,  which  notice 
shall  set  forth  the  nature  of  the  application,  and  shall  specify 
the  time  and  place  at  which  it  is  to  be  heard,  and  shall  be 
published  in  some  newspaper  of  the  county  once  a  week  for 
eight  weeks,  or  if  no  newspaper  is  published  in  the  county, 
by  publication  in  the  newspaper  nearest  thereto  in  the  state. 
At  the  time  and  place  appointed,  or  at  any  other  time  to 


287  FORMATION  OF  GENERALLY.  §  429 

which  it  may  be  postponed  by  the  judge,  he  shall  proceed 
to  consider  the  application,  and  if  satisfied  that  the  cor- 
poration has  taken  necessary  preliminary  steps  and  obtained 
the  necessary  vote  to  dissolve  itself,  and  that  all  claims 
against  the  corporation  are  discharged,  he  shall  enter  an 
order  declaring  it  dissolved.  [Laws  1873,  §22,  p.  405;  Cd. 
1881,  §  2442;  1  H.  C,  §  1519;  Bal.,  §  4275.] 

After  a  corporation  has  ceased  to  do  business,  a  trustee  having 
ceased  to  be  such  is  no  longer  in  a  fiduciary  position,  and  may  pur- 
chase outstanding  obligations  of  the  corporation  and  enforce  them 
for  his  own  benefit.     (Stanton  v.  Gilpin,  38  Wash.  191,  80  Pac.  290.) 

After  a  corporation  has  ceased  to  do  business  and  a  trustee  and 
director  has  ceased  to  be  such,  service  on  such  person  is  not  service 
on  the  corporation  binding  on  other  stockholders.  (Stanton  v.  Gil- 
pin, 38  Wash.  191,  80  Pac.  290.) 

A  trustee,  long  after  the  corporation  has  ceased  doing  business, 
may  purchase  notes  and  judgments  against  the  company.  (Stanton 
V,  Gilpin,  38  Wash.  191,  80  Pac.  290.) 

Decree  of  dissolution  warranted  where  company  shown  to  be  in- 
solvent. (State  ex  rel.  Jenkins  v.  Equitable  Indem.  Co.,  18  Wash. 
514,  52  Pac,  234.) 

Court  has  no  jurisdiction  to  appoint  receiver  on  quo  warranto  pro- 
ceeding under  2  Hill's  Code,  section  689  (2  Bal.  Code,  sec.  5790). 
(State  ex  rel.  Amsterdamsch  Kantoor  v.  Superior  Court,  15  Wash. 
668,  47  Pac.  31.) 

A  corporation  is  not  enjoined  from  selliDg  all  its  property  where 
there  is  no  fraud.  (Smith  v.  Flathead  Biver  Coal  Co.,  66  Wash.  408, 
119  Pac.  858.) 

§  429.     Removing  Principal  Place  of  Business — Notice. 

[§  37081/2,  Rem.-Bal.]  Any  corporation  desiring  at  any 
time  to  remove  its  principal  place  of  business  into  some  other 
county  in  the  state  shall  file  in  the  office  of  the  county  auditor 
a  certified  copy  of  its  certificate  of  incorporation.  If  it  is 
desired  to  remove  its  principal  place  of  business  to  some 
other  city,  town,  or  locality  within  the  same  county,  publi- 
cation shall  be  made  of  such  removal  at  least  once  a  week 
for  four  weeks  in  the  newspaper  published  nearest  to  the 
city,  town  or  locality  from  which  the  principal  place  of 
business  of  such  corporation  is  desired  to  be  removed.  The 
formation  or  corporate  acts  of  any    corporation  hereafter 


§  430  EXISTING    CORPORATION   LAWS,    1913.  288 

formed  under  this  chapter  shall  not  be  rendered  invalid  by 
reason  of  the  fact  that  its  principal  place  of  business  may 
not  have  been  designated  in  its  certificate  of  incorporation  : 
Provided,  that  within  three  months  from  the  passage  of  this 
chapter,  such  corporation  shall  cause  publication  to  be  made 
once  a  week  for  at  least  four  weeks  in  the  newspaper  pub- 
lished nearest  the  city,  town,  or  locality,  and  where  the  prin- 
cipal place  of  business  of  such  corporation  has  been  in  fact 
located,  designating  the  city,  town  or  locality  and  county 
where  its  principal  place  of  business  shall  be  located.  On 
compliance  with  the  provisions  of  the  section  in  the  several 
cases  herein  mentioned,  the  principal  place  of  business  of  any 
corporation  shall  be  deemed  established  or  removed  at  or  to 
any  designated  city,  town,  or  locality  and  county  in  the  state. 
[Laws  1873,  §  24,  p.  406;  Cd.  1881,  §  24^14;  1  H.  C,  §  1520; 
Bal.,  §  4276.] 

§  430.     Supplemental  Articles — Statement  to  be  Filed. 

[§  3681,  Rem.-Bal.]  That  whenever  any  corporation 
heretofore  or  hereafter  organized  under  the  laws  of  this 
state  (including  such  as  were  organized  under  the  laws  of 
the  territory  of  Washington)  shall  execute  and  file  in  the 
office  of  the  Secretary  of  State  and  in  the  office  of  the  county 
auditor  of  the  proper  county  supplemental  articles  of  in- 
corporation changing  its  corporate  name,  such  corporation 
shall  file  in  the  office  of  such  county  auditor,  at  the  time  of 
filing  such  supplemental  articles  or  within  ten  days  there- 
after, a  written  notice,  signed  by  its  president,  vice-president 
or  secretary,  setting  forth  its  former  corporate  name  and 
its  corporate  name  as  changed  and  stating  that  supple- 
mental articles  making  such  change  of  name  have  been  filed 
in  the  office  of  the  Secretary  of  State  and  in  the  office  of  the 
county  auditor  of  the  county  (naming  it).  It  shall  be  the 
duty  of  the  county  auditor,  on  payment  of  the  proper  re- 
cording fee,  to  record  such  notice  as  deeds  are  recorded  and 
to  index  such  notice  in  the  general  index  in  his  office  under 
the  former  corporate  name  as  grantor  and  under  the  changed 
corporate  name  as  grantee.    A  like  notice  may  at  the  option 


289  FORMATION   OF   GENERALLY.  §§431,432 

of  such  corporation  be  filed  in  the  office  of  the  county  auditor 
of  any  other  county,  and  the  county  auditor  of  such  other 
county  shall  record  and  index  the  same  in  the  manner  here- 
inbefore provided.  Corporations  which  have  heretofore  filed 
supplemental  articles  changing  their  corporate  names  shall 
file  the  notice  herein  provided  for  within  six  months  after  the 
taking  effect  of  this  act.     [Laws  1905,  §  1,  c.  109,  p.  215.] 

Though  an  attempt  to  change  the  name  of  a  company  is  mere  futility, 
a  judgment  will  not  be  set  aside  where  enough  appears  in  the  com- 
plaint to  identify  the  company.  (King  v.  Ilwaco  E.  &  Nav.  Co.,  1 
Wash.  127,  23  Pac.  924.) 

§  431.    Provisions,  etc.,  Extend  to  Water  Companies. 

[§  3678,  Rem.-Bal.]  The  provisions  of  this  act  shall  ex- 
tend to  and  apply  to  all  associations  already  formed  under 
any  law  of  this  state,  or  hereafter  to  be  formed  under  the  pro- 
visions of  this  act  for  the  purpose  of  supplying  any  cities  or 
towns  in  this  state,  or  the  inhabitants  thereof,  with  pure  and 
fresh  water.  [Laws  1873,  §27,  p.  408;  Cd.  1881,  §2447; 
1  H.  C,  §  1521 ;  Bal.,  §  4277.] 

§  432.    Water  Company  may  Acquire  Lands  and  Water. 

[§9504,  Rem.-Bal.]  Such  water  companies,  incorporated 
for  the  purposes  specified  in  the  preceding  section,  shall  have 
the  right  to  purchase  or  take  possession  of  and  use  and  hold 
such  lands  and  waters  for  the  purposes  of  the  company,  lying 
without  the  limits  of  the  city  or  town  intended  to  be  supplied 
with  water,  upon  making  compensation  therefor.  The  mode 
of  proceeding  to  obtain  possession  of  such  lands  for  the  use 
of  the  company,  right  of  way  for  laying  pipes,  aqueducts  for 
the  use  of  the  company,  when  the  parties  cannot  agree,  shall, 
so  far  as  the  same  be  applicable,  be,  as  prescribed  in  section 
51  of  this  compilation:  Provided,  that  nothing  therein  con- 
tained shall  be  so  construed  as  to  authorize  the  appropriation 
of  water  belonging  to  any  person,  unless  the  owner  thereof 
shall  refuse  to  supply  said  city  or  town  with  water,  after 
being  requested  so  to  do  by  the  town  board  or  city  council. 
19 


§§433,434    ExiSTiNC  corporation  laws,  1913.  290 

[Laws  1883,  §  8,  p.  45;  Cd.  1881,  §  2448;  1  H.  C,  §  1522;  BaL, 
§  4278.] 

§  433.  Water  Companies  must  Obtain  Right  or  Privilege 
from  City. 
[§  9505,  Rem.-Bal.]  Water  companies  hereafter  incorpo- 
rating under  the  provisions  of  this  chapter,  must  first  obtain 
from  the  corporate  authorities  of  a  city  or  town  intended  to 
be  supplied  with  water  the  right  or  privilege  so  to  do;  but 
nothing  herein  contained  shall  affect  parties  now  acting 
under  legislative  grants  or  franchises.  [Laws  1873,  §  29. 
p.  408 ;  Cd.  1881,  §  2449 ;  1  H.  C,  §  1523 ;  Bal.,  §  4279.] 

§  434.    Mining  Corporation — Subscription  of  Stock. 

[§  7347,  Rem.-Bal.]  In  incorporations  already  formed,  or 
which  may  hereafter  be  formed  under  this  chapter,  where  the 
amount  of  the  capital  stock  of  such  corporation  consists  of 
the  aggregate  valuation  of  the  whole  number  of  feet,  shares, 
or  interest  in  any  claim  in  any  mining  claim  in  this  state,  for 
the  working  and  development  of  which  such  corporation  shall 
be  or  have  been  formed,  no  actual  subscription  to  the  capital 
stock  of  such  corporation  shall  be  necessary ;  but  each  owner 
in  said  mining  claim  shall  be  deemed  to  have  subscribed  such 
an  amount  to  the  capital  stock  of  such  corporation  as  under 
its  by-laws  will  represent  the  value  of  so  much  of  his  inter- 
est in  said  mining  claim,  the  legal  title  to  which  he  may  by 
deed,  deed  of  trust  or  other  instrument  vest  or  have  vested 
in  such  corporation  for  mining  purposes;  such  subscription 
to  be  deemed  to  have  been  made  on  the  execution  and  de- 
livery to  such  corporation  of  such  deed,  deed  of  trust  or  other 
instrument ;  nor  shall  the  validity  of  any  assessment  levied 
by  the  board  of  trustees  of  such  corporation  be  affected  by 
the  reason  of  the  fact  that  the  full  amount  of  the  capital 
stock  of  such  corporation,  as  mentioned  in  its  certificate  of 
incorporation,  shall  not  have  been  subscribed  as  provided  in 
this  section:  Provided,  that  the  greater  portion  of  said 
amount  of  capital  stock  shall  have  been  so  subscribed:  And 
provided  further,  that  this  section  shall  not  be  so  construed  as 


291  FORMATION   OF   GENERALLY.  §§  435-437 

to  prohibit  the  stockholders  of  any  corporation  formed,  or 
which  may  be  formed  for  mining  purposes  as  provided  in  this 
section,  from  regulatinf^  the  mode  of  makinf?  subscriptions  to 
its  capital  stock  and  calling  in  the  same  by  by-laws  or  ex- 
press contract.  [Laws  1873,  §  26,  p.  407  ;  Cd.  1881,  §  2446 ;  1 
H.  C,  §1588;Bal.,  §4280.] 

§  435,     Corporations  Prior  to  1872  may  Hold  Property. 

[§  3685,  Rem.-Bal.]  All  private  corporations  incorporated 
by  the  legislative  assembly  of  the  territory  of  Washington, 
prior  to  the  tenth  day  of  June,  eighteen  hundred  and  seventy- 
two,  other  than  for  religious  purposes,  be  and  they  are  hereby 
authorized  to  hold,  acquire,  own  and  possess  real  and  per- 
sonal property  to  the  extent  and  to  such  amount  as  to  said 
eorporation  may  seem  meet,  anything  in  the  acts  incorporat- 
ing said  private  corporations  to  the  contrary  notwithstand- 
ing.    [Laws  1891,  §  1,  p.  73;  1  H.  C,  §  1501;  Bal.,  §  4254.] 

§  436.     Corporations  Prior  to  1862  may  Make  and  Secure 
Debts. 

[§  3699,  Rem.-Bal.]  That  all  private  corporations  incor- 
porated by  the  legislative  assembly  of  the  territory  of  Wash- 
ington prior  to  the  first  day  of  January,  1862,  other  than  cor- 
porations created  for  religious  purposes,  be  and  they  hereby 
are  authorized  and  empowered  to  issue  notes,  bonds,  mort- 
gages or  other  evidence  of  indebtedness  and  to  secure  the 
payment  of  the  same  by  mortgage,  trust  deed  or  otherwise 
encumbering  any  real  or  personal  property  owned  by  said 
corporations.  Said  corporations  shall  have  power  to  buy, 
sell  or  otherwise  deal  in  notes,  bonds  and  stocks  of  other  cor- 
porations, and  shall  have  power  through  their  duly  author- 
ized officers  to  execute  any  and  all  instruments  necessary  to 
carry  out  the  powers  conferred  upon  said  corporations  by 
the  provisions  of  this  act.  [Laws  1893,  §1,  p.  279;  Bal,, 
§4267.] 

§  437.     Corporate  Names  not  to  be  Duplicated. 

[§  3680,  Rem.-Bal.]  Private  corporations  may  be  formed 
in  the  manner  prescribed  by  the  laws  of  this  state  governing 


§  438  EXISTING    CORPORATION   LAWS,    1913.  292 

corporations  for  any  purpose  for  which  individuals  may  law- 
fully associate.  No  corporation  shall  take  the  name  of  a  cor- 
poration theretofore  [heretofore]  organized  under  the  laws 
of  this  state,  nor  of  any  foreign  corporation  having  com- 
plied with  the  laws  of  this  state,  nor  one  so  nearly  resembling 
the  name  of  such  other  corporation  as  to  be  misleading. 
The  Secretary  of  State  shall  refuse  to  file  said  articles  of  in- 
corporation of  any  association  or  corporation  violating  the 
provisions  of  this  act.     [Laws  1903,  §  1,  p.  124.] 

Mandamus  will  not  issue  to  compel  a  secretary  to  strike  from  the 
records  the  name  of  the  company  delinquent  in  license  fees  for  use 
of  another  company.  (State  ex  rel.  Harper  v.  Howell,  56  Wash.  694, 
106  Pac.  470.) 

A  foreign  company,  by  complying  with  the  laws  of  the  state,  can- 
not use  its  corporate  name  in  unfair  competition  with  a  local  part- 
nership, (Eastern  Outfitting  Co.  v.  Manheim,  59  Wash.  428,  110 
Pac.  23.) 

§  438.  Protection  of  Stockholders  from  Fraudulent  Report. 
[§  3703,  Rem.-Bal.]  Any  superintendent,  director,  secre- 
tary, manager,  agent  or  other  officer  of  any  corporation 
formed  or  existing  under  the  laws  of  this  state,  or  transact- 
ing business  in  this  state,  or  any  person  pretending  or  hold- 
ing himself  out  as  such  superintendent,  director,  secretary, 
manager,  agent  or  other  officer,  who  shall  willfully  subscribe, 
sign,  indorse,  verify  or  otherwise  assent  to  the  publication, 
either  generally  or  privately,  to  the  stockholders  or  to  other 
persons  dealing  with  such  corporation,  or  its  stock,  any  will- 
fully untrue  or  willfully  and  fraudulently  exaggerated  re- 
port, prospectus,  account,  statement  of  operations,  values, 
business  profits,  expenditures  or  prospects,  or  other  paper  or 
document  intended  to  produce  or  give,  or  having  a  tendency 
to  produce  or  give,  to  the  shares  of  stock  in  such  corpora- 
tion a  greater  value  than  they  really  possess,  or  with  the  in- 
tention of  defrauding  any  particular  person  or  persons,  or 
the  public  or  persons  generally,  shall  be  deemed  guilty  of  an 
offense  against  the  laws  of  the  state  of  Washington,  and, 
upon  conviction  thereof,  shall  be  punished  by  imprisonment 
in  the  penitentiary,  not  less  than  one  nor  more  than  five 


293  FORMATION   OF   GENERALLY.  §§439,440 

years,  or  in  the  county  jail  not  more  than  one  year,  or  by  a 
fine  not  exceeding  two  thousand  dollars  or  by  both.  [Laws 
1903,  §  1,  p.  141.] 

§  439,     Fraud  in  Stock  Subscription. 

[§  2638,  Rem.-Bal.]  Every  person  who  shall  sign  the 
name  of  a  fictitious  person  to  any  subscription  for  or  any 
agreement  to  take  stock  in  any  corporation  existing  or  pro- 
posed, and  every  person  who  shall  sign  to  any  such  subscrip- 
tion or  agreement  the  name  of  any  person,  knowing  that 
such  person  does  not  intend  in  good  faith  to  comply  with  the 
terms  thereof,  or  upon  any  understanding  or  agreement  that 
the  terms  of  such  subscription  or  agreement  are  not  to  be 
complied  with  or  enforced,  shall  be  guilty  of  a  gross  mis- 
demeanor.    [Laws  1909,  §  386,  p.  1009.] 

§  440.     Fraudulent  Issue  of  Stock,  Scrip,  etc. 

[§  2639,  Rem.-Bal.]  Every  officer,  agent  or  other  person 
in  the  service  of  a  joint  stock  company  or  corporation,  domes- 
tic or  foreign,  who,  willfully  and  knowingly  with  intent  to 
defraud,  shall — 

1.  Sell,  pledge  or  issue  or  cause  to  be  sold,  pledged  or 
issued,  or  sign  or  execute  or  cause  to  be  signed  or  executed, 
with  intent  to  sell,  pledge  or  issue,  or  cause  to  be  sold, 
pledged  or  issued,  any  certificate  or  instrument  purporting 
to  be  a  certificate  or  evidence  of  ownership  of  any  share  or 
shares  of  such  company  or  corporation,  or  any  conveyance 
or  encumbrance  of  real  or  personal  property,  contract,  bond, 
or  evidence  of  debt,  or  writing  purporting  to  be  a  conveyance 
or  encumbrance  of  real  or  personal  property,  contract,  bond 
or  evidence  of  debt  of  such  company  or  corporation,  with- 
out being  first  duly  authorized  by  such  company  or  corpora- 
tion, or  contrary  to  the  charter  or  laws  under  which  such 
company  or  corporation  exists,  or  in  excess  of  the  power  of 
such  company  or  corporation,  or  of  the  limit  imposed  by  law 
or  otherwise  upon  its  power  to  create  or  issue  stock  or  evi- 
dence of  debt ;  or, 

2.  Reissue,  sell,  pledge  or  dispose  of,  or  cause  to  be 
reissued,  sold,  pledged  or  disposed  of,  any  surrendered  or 


§§  441-443      EXISTING    CORPORATION   LAWS,    1913.  294 

canceled   certificate   or   other   evidence    of   the   transfer   of 
ownership  of  any  such  share  or  shares — 

Shall  be  punished  by  imprisonment  in  the  state  peniten- 
tiary for  not  more  than  ten  years,  or  by  a  fine  of  not  more 
than  five  thousand  dollars,  or  by  both.  [Laws  1909,  §  387, 
p.  1010.] 

§  441.    Insolvent  Bank  Receiving  Deposit. 

[§  2640,  Rem.-Bal.]  Every  owner,  officer,  stockholder, 
agent  or  employee  of  any  person,  firm,  corporation  or  asso- 
ciation engaged,  wholly  or  in  part,  in  the  business  of  bank- 
ing or  receiving  money  or  negotiable  paper  as  securities  on 
deposit  or  in  trust,  who' shall  accept  or  receive,  with  or  with- 
out interest,  any  deposit,  or  who  shall  consent  thereto  or 
connive  thereat,  when  he  knows  or  has  good  reason  to  be- 
lieve that  such  person,  firm,  corporation  or  association  is 
unsafe  or  insolvent,  shall  be  punished  by  imprisonment  in 
the  state  penitentiary  for  not  more  than  ten  years,  or  by  a 
fine  of  not  more  than  ten  thousand  dollars.  [Laws  1909,  § 
388,  p.  1010.] 

The  section  does  not  apply  to  private  bankers.  (State  v.  Young- 
bluth,  60  Wash.  383,  111  Pac.  240.) 

It  is  immaterial  whether  the  owner,  officer,  etc.,  is  present  or 
absent  at  the  time  the  deposit  is  received.  (State  r.  Welty,  65  Wash. 
244,  118  Pac.  9.) 

§  442.     Corporation  Doing  Business  Without  License. 

[§  2641,  Rem.-Bal.]  Every  corporation,  whether  domestic 
or  foreign,  and  every  person  representing  or  pretending  to 
represent  such  corporation  as  an  officer,  agent  or  employee 
thereof,  who  shall  transact,  solicit  or  advertise  for  any  busi- 
ness in  this  state,  before  such  corporation  shall  have  ob- 
tained from  the  officer  lawfully  authorized  to  issue  the  same, 
a  certificate  that  such  corporation  is  authorized  to  transact 
business  in  this  state,  shall  be  guilty  of  a  gross  misdemeanor. 
[Laws  1909,  §  389,  p.  1011.] 

§  443.    False  Report  of  Corporation. 

[§2642,  Rem.-Bal.]  Every  director,  officer  or  agent  of 
any  corporation  or  joint  stock  association,  and  every  person 


295  FORMATION    OP   GENERALLY.  §§  444,  445 

engaged  in  organizing  or  promoting  any  enterprise,  who 
shall  knowingly  make  or  publish  or  concur  in  making  or 
publishing  any  written  prospectus,  report,  exhibit  or  state- 
ment of  its  affairs  or  pecuniary  condition,  containing  any 
material  statement  that  is  false  or  exaggerated,  shall  be  pun- 
ished by  imprisonment  in  the  state  penitentiary  for  not  more 
than  ten  years,  or  by  a  fine  of  not  more  than  five  thousand 
dollars.     [Laws  1909,  §  390,  p.  1011.] 

§  444.     Warehouseman  or  Carrier  Refusing  to  Issue  Receipt. 

[§  2643,  Rem.-Bal.]  Every  person  or  corporation,  and 
every  officer,  agent  and  employee  thereof,  receiving  any 
goods,  wares  or  merchandise,  for  sale  or  on  commission,  for 
storage,  carriage  or  forwarding,  who,  having  an  opportunity 
to  inspect  the  same,  shall  fail  or  refuse  to  deliver  to  the 
owner  thereof  a  receipt  duly  signed,  bearing  the  date  of  issu- 
ance, describing  the  goods,  wares  or  merchandise  received 
and  the  quantity,  quality  and  condition  thereof,  and  specify- 
ing the  terms  and  conditions  upon  which  they  are  received, 
shall  be  guilty  of  a  misdemeanor.  [Laws  1909,  §  391,  p. 
1011.] 

§  445.    Fictitious  Bill  of  Lading  and  Receipt. 

[§  2644,  Rem.-Bal.]  Every  person  or  corporation  engaged 
wholly  or  in  part  in  the  business  of  a  common  carrier  or 
warehouseman,  and  every  officer,  agent  or  employee  thereof, 
who  shall  issue  any  bill  of  lading,  receipt  or  other  voucher 
by  which  it  shall  appear  that  any  goods,  wares  or  merchan- 
dise have  been  received  by  such  carrier  or  warehouseman, 
unless  the  same  have  been  so  received  and  shall  be  at  the 
time  actually  under  his  control,  or  who  shall  issue  any  bill 
of  lading,  receipt  or  voucher  containing  any  false  statement 
concerning  any  material  matter,  shall  be  guilty  of  a  gross 
misdemeanor.  But  no  person  shall  be  convicted  under  this 
section  for  the  reason  that  the  contents  of  any  barrel,  box, 
case,  cask  or  other  closed  vessel  or  package  mentioned  in 
the  bill  of  lading,  receipt  or  voucher  did  not  correspond  with 
the  description  thereof  in  such  instrument,  if  such  descrip- 
tion corresponds  substantially  with  the  mark  on  the  outside 


§§  446-449    EXISTING  corporation  laws,  1913.  296 

of  such  barrel,  box,  case,  cask,  vessel  or  package,  unless  it 
appears  that  the  defendant  knew  that  such  marks  were  un- 
true.    [Laws  1909,  §  392,  p.  1012.] 

§  446.     Warehouseman  Fraudulently  Mixing  Goods. 

[§  2645,  Rem.-Bal.]  Every  person  mentioned  in  section 
392  of  this  act  [2644,  Rem.-Bal.] ,  who  shall  fraudulently  mix 
or  tamper  with  any  goods,  wares  or  merchandise  under  his 
control,  shall  be  guilty  of  a  gross  misdemeanor.  [Laws  1909, 
§  393,  p.  1012.] 

§  447.    Duplicate  Receipt. 

[§  2646,  Rem.-Bal.]  Every  person  mentioned  in  section 
392  of  this  act  [2644,  Rem.-Bal.],  who  shall  issue  any  second 
or  duplicate  receipt  or  voucher  of  the  kind  specified  in  said 
section,  while  a  former  receipt  or  voucher  for  the  goods, 
wares  or  merchandise  specified  in  such  second  receipt  is  out- 
standing and  uncanceled,  without  writing  across  the  face  of 
the  same  the  word  "Duplicate,"  in  a  plain  and  legible  man- 
ner, shall  be  guilty  of  a  misdemeanor.  [Laws  1909,  §  394, 
p.  1012.] 

§  448.     Bill  of  Lading  or  Receipt  must  be  Canceled  on  Re- 
delivery of  Property. 

[§  2647,  Rem.-Bal.]  Each  person  mentioned  in  section 
392  of  this  act  [2644  Rem.-Bal.]  who  shall  deliver  to  another 
any  goods,  wares  or  merchandise  for  which  a  bill  of  lading, 
receipt  or  voucher  has  been  issued,  unless  such  bill  of  lading, 
receipt  or  voucher  is  surrendered  and  canceled  or  a  lawful 
and  sufficient  bond  or  undertaking  is  given  therefor  at  the 
time  of  such  delivery,  or  unless,  in  case  of  a  partial  delivery, 
a  memorandum  thereof  is  indorsed  upon  such  bill  of  lading, 
receipt  or  voucher,  shall  be  guilty  of  a  misdemeanor.  [Laws 
1909,  §  395,  p.  1013.] 

§  449.    Regulating  Sale  of  Passage  Tickets. 

[§  2648,  Rem.-Bal.]  It  shall  be  the  duty  of  every  person 
or  corporation  engaged  wholly  or  in  part  in  the  business  of 
carrying  passengers  for  hire,  to  provide  every  agent  author- 
ized to  sell  its  passage  tickets  in  this  state,  with  a  certificate 


297  FORMATION  OF  GENERALLY.  §  450 

of  his  authority,  attested  by  its  seal  and  the  signature  of  its 
manager,  secretary  or  general  passenger  agent,  which  shall 
contain  a  designation  of  the  place  of  business  at  which  such 
authority  shall  be  exercised. 

Every  person  and  every  corporation  or  association,  and 
every  officer,  agent  or  employee  thereof  who  shall  sell,  ex- 
change or  transfer,  or  have  in  his  possession  with  intent  to 
sell,  exchange  or  transfer,  or  maintain,  conduct  or  operate 
any  office  or  place  of  business  for  the  sale,  exchange  or  trans- 
fer of  any  passage  ticket  or  pass  or  part  thereof,  or  any 
other  evidence  of  a  right  to  travel  upon  any  railroad  or  boat, 
whether  the  same  be  owned  or  operated  within  or  without 
the  limits  of  this  state,  in  any  place  except  his  place  of  busi- 
ness, or  within  such  place  of  business  without  having  right- 
fully in  his  possession  and  posted  in  a  conspicuous  place 
therein  the  certificate  of  authority  hereinabove  provided  for, 
shall  be  guilty  of  a  misdemeanor.  [Laws  1909,  §  396,  p. 
1013.] 

§  450.    Redemption  of  Unused  Passage  Ticket. 

[§  2649,  Rem.-Bal.]  Every  person  or  corporation  engaged 
wholly  or  in  part  in  the  business  of  carrying  passengers  for 
hire  in  this  state,  and  every  authorized  ticket  agent  thereof, 
to  whom  there  shall  be  presented  by  the  holder  thereof, 
within  one  year  after  its  expiration,  any  passage  ticket  or 
part  thereof,  or  other  evidence  of  right  to  travel,  wholly  or 
in  part  upon  the  railroad  or  boat  of  such  person  or  corpora- 
tion, which  shall  be  wholly  or  partially  unused,  who  shall 
fail  to  redeem  the  same  within  three  days  after  presentation, 
upon  the  following  terms,  to  wit : 

1.  "When  wholly  unused,  for  the  price  paid  therefor;  and 

2.  When  partially  unused,  for  the  price  paid  therefor,  less 
the  regular  toll  or  charge  for  the  passage  had; 

Shall  be  punished  by  a  fine  of  not  more  than  five  hundred 
dollars,  and  in  addition  thereto  shall  forfeit  to  the  holder  of 
such  ticket  or  part  thereof  or  other  evidence  of  a  right  to 
travel,  three  times  the  redeemable  value  thereof.  [Laws 
1909,  §  397,  p.  1013.] 


§  451  EXISTING    CORPORATION   LAWS,    1913.  298 

§  451.    Acknowledgment — Form  of  by  Corporation. 

[§  87611/2,  Rem.-Bal.]  Certificates  of  acknowledgment  of 
an  instrument  acknowledgedi  by  a  corporation  substantially 
in  the  following  form  shall  be  sufficient: 

State  of  

County  of , — ss. 

On  this   day  of   ,  A.  D.  19 ,  before  me 

personally  appeared to  me  known  to  be  the  [presi- 
dent, vice-president,  secretary,  treasurer,  or  other  authorized 
officer  or  agent,  as  the  case  may  be]  of  the  corporation  that 
executed  the  within  and  foregoing  instrument,  and  acknowl- 
edged the  said  instrument  to  be  the  free  and  voluntary  act 
and  deed  of  said  corporation,  for  the  uses  and  purposes 
therein  mentioned,  and  on  oath  stated  that  he  was  author- 
ized to  execute  said  instrument,  and  that  the  seal  affixed  is 
the  corporate  seal  of  said  corporation. 

In  witness  whereof,  I  have  hereunto  set  my  hand  and 
affixed  my  official  seal  the  day  and  year  first  above  written. 

[Signature  and  title  of  officer.] 

[Laws  1903,  §  1,  p.  245.] 

§  451a.     Notaries  Public. 

It  shall  be  lawful  for  any  notary  public  who  is  a  stock- 
holder, director,  officer  or  employee  of  a  bank  or  other  corpo- 
ration to  take  the  acknowledgment  of  any  party  to  any 
written  instrument  executed  to  or  by  such  corporation,  or 
to  protest  for  nonacceptance  or  nonpayment  bills  of  ex- 
change, drafts,  checks,  notes  and  other  negotiable  instru- 
ments which  may  be  owned  or  held  for  collection  by  such 
corporation:  Provided,  it  shall  be  unlawful  for  any  notary 
public  to  take  the  acknowledgment  of  an  instrument  by  or 
to  a  bank  or  other  corporation  of  which  he  is  a  stockholder, 
director,  officer  or  employee,  where  such  notary  is  a  party 
to  such  instrument  individually  or  to  protest  any  negotiable 
instrument  owned  or  held  for  collection  by  such  corporation, 
where  such  notary  is  individually  a  party  to  such  instru- 
ment.    [Laws  1913,  e.  32.J 


299  FOREIGN  CORPORATIONS.  §  452 


FOREIGN  CORPORATIONS. 

§  452.    Power  of,  to  Do  Business  in  This  State. 

[§  3720,  Rem.-Bal.]  Any  corporation  incorporated  under 
the  laws  of  any  state  or  territory  in  the  United  States,  or  of 
any  foreign  country,  state  or  colony,  for  any  of  the  purposes 
which  domestic  corporations  are  authorized  to  be  formed 
under  the  laws  of  this  state,  shall  have  full  power  and  is 
hereby  authorized  to  sue  and  to  be  sued  in  any  court  having 
competent  jurisdiction,  to  acquire,  purchase,  hold,  mortgage, 
sell,  convey,  or  otherwise  dispose  of,  in  the  corporate  name, 
all  real  estate  or  personal  property  necessary  or  convenient 
to  carry  into  effect  the  objects  and  purposes  of  its  corpora- 
tion, and  also  any  interest  in  real  estate,  by  mortgage  or 
otherwise  do  [due]  to  or  loans  made  by  such  foreign  cor- 
porations within  the  boundaries  of  this  state,  either  prior 
to  or  after  the  passage  of  this  act,  and  generally  do  and 
perform  every  act  and  transact  every  kind  of  business  within 
this  state  in  the  same  manner  and  to  the  same  extent  as  cor- 
porations incorporated  and  organized  under  the  laws  of  this 
state  are  authorized  to  do  under  the  laws  of  this  state,  by 
a  compliance  with  all  the  conditions  prescribed  by  the  next 
two  succeeding  sections  of  this  chapter:  Provided,  however, 
that  this  act  shall  not  be  [so]  construed  as  to  allow  such 
foreign  corporation  to  transact  business  within  the  state 
on  more  favorable  conditions  than  are  prescribed  by  law  for 
a  similar  corporation  organized  under  the  laws  of  this  state : 
And  provided  further,  that  no  corporation,  the  majority  of 
the  capital  stock  of  which  is  owned  by  aliens,  other  than 
those  who  in  good  faith  have  declared  their  intention  to  be- 
come citizens  of  the  United  States,  shall  acquire  the  owner- 
ship of  any  lands  in  this  state  other  than  lands  containing 
valuable  deposits  of  minerals,  metals,  iron,  coal  or  fireclay, 
and  the  necessary  land  for  mills  and  machinery  to  be  used 
in  the  development  thereof,  and  the  manufacture  of  the 
products  therefrom,  except  where  acquired  under  mortgage, 
or  in  good  faith  in  the  ordinary  course  of  justice  in  the  col- 


§  452  EXISTING   CORPORATION  LAWS,    1913.  300 

lection  of  debts:  Provided  further,  that  no  foreign  corpora- 
tion which  is  hereafter  organized  which  has  among  its  other 
powers  the  business  of  dealing  in  real  estate,  and  buying  and 
selling  the  same,  and  for  the  purpose  of  carrying  on  -a  real 
estate  brokerage  business  shall  be  permitted  to  transact  such 
business  of  buying  and  selling  and  dealing  in  real  estate,  and 
carrying  on  a  brokerage  business  therein,  in  this  state ;  but 
this  prohibition  shall  not  extend  to  any  other  business  for  the 
transaction  of  which  such  corporation  may  be  organized. 
[Laws  1890,  §1,  p.  288;  Cd.  1881,  §2479;  1  H.  C,  §1524; 
Bal.,  §  4291.] 

The  fact  that  a  fishing  company  had  its  active  place  of  business 
outside  the  state  did  not  make  it  a  nonresident.  (Hastings  v.  Ana- 
cortes  Packing  Co.,  29  Wash.  224,  69  Pac.  776.) 

A  foreign  corporation  organized  prior  to  the  act  of  March  28,  1890, 
prohibiting  foreign  corporations  from  dealing  as  brokers  of  real  estate 
is  not  within  that  statute.  (Realty  Co.  v.  Appolonio,  5  Wash.  437, 
32  Pac.  219.) 

In  the  absence  of  proof,  a  foreign  corporation  is  presumed  to  have 
power  to  purchase  its  own  stock.  (Yeaton  v.  Eagle  Oil  &  Ref,  Co., 
4  Wash.  183,  29  Pac.  1051.) 

A  contract  cannot  be  repudiated  on  the  ground  that  the  foreign 
company  has  not  complied  with  the  statute  for  authority  to  do  busi- 
ness.     (Whitman  Agr.  Co.  v.  Strand,  8  Wash.  647,  36  Pac.  682.) 

Though  a  foreign  corporation  has  failed  to  comply  with  the  statute 
for  authority  to  do  business,  its  contracts  are  binding  on  it.  (Edison 
Gen.  Electric  Co.  v.  Canadian  Pac.  Nav.  Co.,  8  Wash.  370,  36  Pac.  260; 
Horrell  v.  California  etc.  Assn.,  40  Wash.  531,  82  Pac.  889.) 

A  deed  delivered  to  a  corporation  after  compliance  with  the  statute 
but  executed  prior  thereto  is  not  void.  (Sayward  v.  Gardner,  5  Wash. 
247,  31  Pac.  761,  33  Pac.  389.) 

Compliance  with  the  statute*  by  a  foreign  company  after  filing  of 
lien  notice,  but  before  suit  to  foreclose  the  same,  is  sufficient  in  the 
suit.  (Huttig  Bros.  Mfg.  Co.  v.  Denny  Hotel  Co.,  6  Wash,  122,  32 
Pac,  1073.) 

A  party  contracting  with  a  foreign  corporation  is  estopped  to  set 
up  failure  to  comply  with  the  statute.  (Rathbone,  Sard  &  Co.  v. 
Frost,  9  Wash.  162,  37    Pac.  298.) 

A  fishing  license  is  not  within  the  constitutional  provision  pro- 
hibiting aliens  from  holding  land.  (Hastings  v.  Anacortes  Packing 
Co.,  29  Wash.  224,  69  Pac.  776.) 


301  FOREIGN   CORPORATIONS.  §  452 

A  foreign  corporation  may  sue  in  this  state  without  the  appointment 
of  an  agent.  (Dearborn  Foundry  Co.  v.  Augustine,  5  Wash.  67,  31 
Pac.  327;  La  France  Fire  Engine  Co.  v.  Mt.  Vernon,  9  Wash.  142,  37 
Pac.  287,  38  Pac.  80;  Marble  Savings  Bank  v.  Williams,  23  Waijh.  766, 
63  Pac.  511.) 

It  was  held  that  the  court  had  jurisdiction  of  a  foreign  corporation 
defendant  which  was  doing  business  in  the  state  and  whose  officers 
were  residents  of  the  state.  (Lively  v.  Husebye,  60  Wash.  47,  110 
Pac.  673.) 

Ballinger's  Code,  section  4854,  requiring  actions  against  corpora- 
tions to  be  brought  in  the  county  where  the  company  has  an  office 
or  person  upon  whom  service  may  be  made  resides  does  not  apply 
to  foreign  corporations  having  no  office  or  place  of  business  in  the 
state.  (Butler  v.  Supreme  Court  of  Foresters,  48  Wash.  147,  93  Pac. 
66;  Campbell  v.  Order  of  Washington,  53  Wash.  398,  102  Pac.  410.) 

A  general  appearance  to  dismiss  an  action  against  a  foreign  com- 
pany where  the  court  has  no  jurisdiction  of  the  subject  matter  does 
not  confer  jurisdiction.  (Hammel  v.  Fidelity  Mutual  Aid  Assn.,  43 
Wash.  448,  85  Pac.  35.) 

A  foreign  corporation  may  be  indicted  for  creating  a  public  nui- 
sance.    (State  V.  Paggett,  8  Wash.  579,  36  Pac.  487.) 

Where  a  foreign  corporation  is  not  doing  business  in  the  state, 
service  on  an  officer  temporarily  in  the  state  does  not  give  jurisdic- 
tion. (Carstens  &  Earles  v.  Leidigh  &  Havens  Lumber  Co.,  18  Wash. 
450,  51  Pac.  1051.) 

A  foreign  corporation  not  doing  business  in  the  state  cannot  be  re- 
quired to  answer  in  an  action  in  personam.  (Rich  v.  Chicago  etc.  R. 
Co.,  34  Wash.  14,  74  Pac.  1008.) 

Where  a  company  has  an  agent  located  within  the  state  who  does 
business  for  the  company,  it  is  doing  business  in  the  state.  (Lee  v. 
Fidelity  Storage  etc.  Co.,  51  Wash.  208,  98  Pac.  658;  Womach  v.  Case 
etc.  Co.,  62  Wash.  661,  114  Pac.  509.) 

Routing  of  freight  over  a  foreign  railway  by  soliciting  agent  is 
not  doing  business  within  the  state.  (Arrow  Lumber  etc.  Co.  v.  Union 
Pac.  R.  Co.,  53  Wash.  629,  102  Pac.  650.) 

A  foreign  company  with  trust  company  powers  must  comply  with 
the  trust  company  laws  of  this  state.  (State  v.  Nichols,  47  Wash. 
117,  91  Pac.  632.) 

A  foreign  company  authorized  to  do  brokerage  business  in  real  estate 
may  file  its  articles  and  do  such  other  business  as  its  charter  and  the 
law  permits.  Section  4291  of  Ballinger's  Code  does  not  prevent. 
(State  V.  Nichols,  48  Wash.  605,  94  Pac.  196.) 

A  foreign  corporation  by  complying  with  the  laws  of  this  state  can 
not  use  its  corporate  name  in  unfair  competition  with  a  local  partner- 
ship.    (Eastern  Outfitting  Co.  v.  Manheim,  59  Wash.  428,  110  Pac.  23.) 


§  453  EXISTING    CORPORATION   LAWS,    1913.  302 

§  453.     Certified  Copy  of  Charter,  etc.,  to  be  Filed  and  Re- 
corded. 

[§  3721,  Rem.-Bal.]  Such  corporation  shall  cause  to  be 
filed  and  recorded  in  the  office  of  the  Secretary  of  State  a 
copy  of  its  charter,  articles  of  incorporation,  memorandum 
of  'association,  or  certificate  of  incorporation,  certified  to  by 
the  officer  who  is  the  custodian  of  the  same  according  to  the 
laws  of  the  state  or  territory,  country  or  colony  where  such 
corporation  is  incorporated,  or  who  is  authorized  to  issue 
certificates  of  incorporation  according  to  laws  of  such  state, 
territory  or  foreign  country  or  colony.  The  instruments 
herein  required  to  be  filed  and  recorded  shall  be  attested  by 
such  certifying  officer  under  his  hand  and  seal  of  office,  which 
attestation  shall  be  prima  facie  proof  of  the  facts  herein 
stated,  and  the  genuineness  of  the  certificate.  If  such  officer 
has  no  official  seal,  his  certificate  shall  state  that  fact  over 
his  signature,  and  thereupon  the  Secretary  of  State  or  of 
the  territory,  in  case  of  corporations  within  the  United 
States,  and  the  consul-general,  consul,  vice-consul,  deputy 
consul,  consular  agent,  or  commercial  agent  of  the  United 
States,  at  or  nearest  to  the  place  where  such  certificate  is 
made,  in  the  case  of  corporations  not  within  the  United 
States,  shall  certify  under  his  hand  and  seal  of  office  to  the 
genuineness  of  the  signature  of  the  officer  making  the  cer- 
tificate, and  to  the  fact  that  at  the  time  of  making  such  cer- 
tificate the  person  making  the  same  held  the  office  described 
in  the  certificate.  [Laws  1890,  §  2,  p.  289;  Cd.  1881,  §  2480; 
1  H.  C,  §1525;  Bal.,  §4292.] 

Copy  of  articles  of  incorporation  and  certified  copy  of  appointment 
of  agent  prima  facie  evidence  of  right  of  foreign  corporation  to  do  busi- 
ness.    (Knapp,  Burrell  Co.  v.  Strand,  4  Wash.  686,  30  Pac,  1063.) 

Special  act  incorporating  foreign  company  not  presumed  unconsti- 
tutional. (Fidelity  Insurance  Co.  v.  Nelson,  30  Wash.  340,  70  Pac. 
961.) 

Purpose  of  1  Hill's  Code,  sections  1524-1531  (1  Bal.  Code,  sees. 
4291-4298),  requiring  foreign  corporations  to  file  certified  copies  of 
their  articles  and  appoint  an  agent  to  receive  service,  is  to  prevent 
imposition  and  provide  means  of  obtaining  service.  (Dearborn  Foundry 
Co.  V.  Augustine,  5  Wash.  67,  31  Pac.  327.) 


303  FOREIGN  CORPORATIONS.  §  454 

No  comity  involved  in  foroign  corporation  filing  articles  under  laws 
of  this  state.  (State  ex  rel.  Baker  etc.  Co.  v.  Nichols,  51  Wash.  619, 
99  Pac.  876.) 

§  454.    Appointment  of  Agent  to  be  Filed  and  Recorded. 

[§  3722,  Rem.-Bal.]      Such  corporations  shall  also  consti- 
tute and  appoint  an  agent,  who  shall  reside  at  the  place  in 
the  state  where  the  principal  business  of  the  corporation  is 
to  be  carried  on,  to  be  designated  as  hereinafter  required. 
Such  appointment  shall  be  in  writing,  signed  by  the  presi- 
dent or  chief  officer  of  such  corporation,  and  shall  be  attested 
by  its  corporate  seal,  and  shall  contain  the  name  of  the  agent, 
his  place  of  residence  sind  the  place   where  the  principal 
business  of  such  corporation  is  to  be  carried  on,  and  shall 
authorize  such  agent  to  accept  service  of  process  in  any  ac- 
tion or  suit  pertaining  to  the  property,  business  or  transac- 
tions of  such  corporation  within  this  state  in  which  such 
corporation  may  be  a  party.     The  signature  of  such  presi- 
dent or  chief  officer,  attested  by  the  corporate  seal  to  such 
written  appointment,  shall  be  sufficient  proof  of  the  appoint- 
ment of  such  agent.     Such  appointment,  when  duly  executed, 
shall  be  filed  for  record  in  the  office  of  the  Secretary  of  State 
by  such  corporation,  and  shall  be  there  recorded;  and  such 
corporation  shall  have  and  keep  continually  some  resident 
agent,  empowered  as  aforesaid  during  all  the  time  such  cor- 
poration shall  conduct  or  carry  on  any  business  within  this 
state,  and  service  of  any  process,  pleading,  notice  or  other 
paper  shall  be  taken  and  held  as  due  service  on  such  corpora- 
tion.    Such  corporation  may  change  its  agent  or  its  prin- 
cipal place  of  business,  from  time  to  time,  by  filing  and 
recording  with  the  Secretary  of  State  a  new  appointment, 
stating  the  change  of  such  agent  or  the  change  in  the  prin- 
cipal place  of  business;  and  in  the  event  such  foreign  cor- 
poration shall  withdraw  from  this  state  and  cease  to  trans- 
act business  therein  it  shall  continue  to  keep  and  maintain 
such  agent  within  this  state  upon  whom  service  of  process, 
pleadings  and  papers  may  be  made,  until  the  statute  of  limi- 
tations shall  have  run  against  anyone  bringing  an   action 
against  said  corporation,  which  accrued  prior  to  its  with- 


§  455  EXISTING    CORPORATION   LAWS,    1913.  304 

drawal  from  this  state.  In  case  said  corporation  shall 
revoke  the  authority  of  its  designated  agent  after  its  with- 
drawal from  this  state  and  prior  to  the  time  when  the  stat- 
utes of  limitations  would  have  run  against  causes  of  action 
accruing  against  it,  then  in  that  event  service  of  process, 
pleadings  and  papers  in  such  actions  may  be  made  upon  the 
Secretary  of  State  of  the  state  of  Washington,  and  the  same 
shall  be  held  as  due  and  sufficient  service  upon  such  corporation. 
[Laws  1909,  §  3,  p.  72;  1  H.  C,  §  1526 ;  Bal.,  §  4293.] 

Sherifif's  return  must  show  service  on  agent  within  the  statute. 
(Cunningham  v.  Spokane  H.  Co.,  18  Wash.  524,  52  Pac.  235.) 

Under  Ballinger's  Code,  section  4893,  service  on  a  statutory  agent 
of  a  foreign  corporation  is  insufficient.  (Bennett  v.  Supreme  Tent 
Maccabees,  40  Wash.  431,  82  Pac.  744.) 

Laws  of  1895,  page  157,  not  exclusive  method  of  service  on  agent, 
and  service  as  provided  in  Ballinger's  Code,  section  4875,  is  sufficient. 
(Tatum  V.  Niagara  Fire  Ins.  Co.,  43  Wash.  373,  86  Pac.  660.) 

Appearance  waives  defective  service.  (Dittenhofer  v.  Coeur 
D'Alene  etc.  Co.,  4  Wash.  519,  30  Pac.  660.) 

Unnecessary  that  appointment  of  attorney  verifying  mechanic's 
lien  notice  for  foreign  company  be  filed  in  office  of  Secretary  of  State. 
(Huttig  Bros.  Mfg.  Co.  v.  Denny  Hotel  Co.,  6  Wash.  122,  32  Pac.  1073.) 

Under  Ballinger's  Code,  section  4854,  superior  court  in  county  where 
foreign  company  has  no  agent  gets  no  jurisdiction  by  service  on  agent 
in  another  county.  (Hammel  v.  Fidelity  Mutual  Aid  Assn.,  42  Wash. 
448,  85  Pac.  35.) 

§  455.    Penalty. 

[§  3723,  Rem.-Bal.]  Any  foreign  corporation  doing  busi- 
ness in  this  state  which  shall  fail  to  comply  with  the  provi- 
sions of  sections  3721  and  3722,  Rem.-Bal.  Code  of  Washing- 
ton, shall  be  subject  to  a  penalty  of  two  hundred  and  fifty  dol- 
lars to  be  recovered  in  a  civil  action  to  be  instituted  by  the  at- 
torney general  in  the  name  of  the  state  of  Washington,  upon 
his  being  furnished  with  a  sworn  statement  of  facts  sufficient 
to  justify  such  action.     [Laws  1899,  §  1,  p.  100.] 

Purchase  of  a  single  promissory  note  or  mortgage  is  not  doing  busi- 
ness in  the  state  within  the  statute  applicable  to  foreign  corporations. 
(Keene  Guaranty  Savings  Bank  v.  Lawrence,  32  Wash.  572,  73  Pac. 
680.) 

Maintaining  advertising  agent  is  not  doing  business  in  the  state. 
(Kich  V.  Chicago  B.  &  Q.  R.  Co.,  34  Wash.  14,  74  Pac,  1008.) 


305  FOREIGN   CORPORATIONS.  §  §  456^58 

Statutory  penalty  for  failure  to  comply  with  the  statute  is  exclu- 
sive. (La  France  Fire  Engine  Co.  v.  Mt.  Vernon,  9  Wash.  142,  37 
Pac.  287,  38  Pac.  80;  Rathbone,  Sard  &  Co.  v.  Frost,  9  Wash.  162,  37 
Pac.  298.) 

Failure  of  foreign  company  to  file  copy  of  charter  and  appoint  agent 
does  not  render  its  contract  void.  (Dearborn  Foundry  Co.  v.  Augus- 
tine, 5  Wash.  67,  31  Pac.  327.) 

Contract  cannot  be  repudiated  on  ground  that  the  foreign  company 
has  not  complied  with  the  statute  for  authority  to  do  business.  (Whit- 
man Agr.  Co.  v.  Strand,  8  Wash.  647,  36  Pac.  682.) 

Only  the  state  has  the  right  to  question  authority  of  foreign  cor- 
poration to  hold  land  in  this  state.  (Oregon  Mtg.  Co.  v.  Carstens,  16 
Wash.  165,  47  Pac.  421;  Goon  Gan  v.  Richardson,  16  Wash.  373,  47 
Pac.  762;  State  ex  rel.  Winston  v.  Hudson  Land  Co.,  19  Wash.  85, 
52  Pac.  574.) 

§  456.    Penalty  Goes  to  State  Treasurer. 

[§  3724,  Rem.-Bal.]  All  penalties  so  recovered  shall  be 
paid  into  the  general  fund  of  the  state  treasury.  [Laws 
1899,  §  2,  p.  100.] 

§  457.     Act  does  not  Apply  to  Companies — When. 

[§  3725,  Rem.-Bal.]  No  corporation  which  has  heretofore 
complied  with  the  laws  of  the  state  or  territory  of  Washing- 
ton hitherto  existing,  regarding  foreign  corporations,  and 
has  kept  a  duly  appointed  agent  within  the  boundaries  of  the 
state  as  heretofore  required,  shall  be  required  to  file  for  rec- 
ord, or  cause  to  be  recorded,  the  certified  copies  required  by 
this  act,  or  to  execute  or  file  for  record,  or  cause  to  be  re- 
corded, a  new  appointment  of  agent  as  herein  required. 
[Laws  1890,  §  4,  p.  290;  1  H.  C,  §  1527;  Bal.,  §  4294.] 

§  458.     County  Assessor  Shall  Report  to  County  Auditor. 

[§  3726,  Rem.-Bal.]  It  shall  be  the  duty  of  each  and  every 
county  assessor  in  this  state  to  ascertain  each  and  every  year, 
at  the  time  of  the  tax  assessment  of  his  county,  the  name  of 
every  foreign  corporation  doing  business  by  agent  or  other- 
wise within  his  county,  the  nature  of  such  business,  and  the 
name  of  the  agent  of  each  of  such  corporations,  if  any  there 
be,  together  with  such  agent's  place  of  address,  and  shall, 
within  ten  days  from  and  after  the  compilation  of  such  as- 
20 


§§459,460      EXISTING    CORPORATION   LAWS,    1913.  306 

sessment,  make  out  and  deliver  to  the  county  auditor  of  his 
county  a  full  and  complete  list  of  the  names  of  such  corpora- 
tions doing  business  in  his  county,  together  with  the  nature 
of  the  business  so  carried  on  by  each  of  such  corporations 
and  the  name  of  the  resident  agent  of  each  of  such  corpora- 
tions, if  any  there  be,  and  the  place  of  residence  of  each  of 
such  agents.     [Cd.  1881,  §  2482 ;  1  H.  C,  §  1528  ;  Bal.,  §  4295.] 

§  459.     County  Auditor  to  Report  to  Secretary  of  State. 

[§  3727,  Rem.-Bal.]  It  shall  be  the  duty  of  each  and  every 
county  auditor  in  this  state  to  make  out  and  transmit  to  the 
Secretary  of  State,  within  thirty  days  after  the  receipt  by 
him  from  such  county  assessor  of  the  lists  provided  in  sec- 
tion fifteen  hundred  and  twenty-eight  of  this  volume  of  gen- 
eral statutes  [3726,  Rem.-Bal.],  a  full,  true  and  concise  state- 
ment of  the  names  of  such  corporations,  their  place  of  busi- 
ness, the  nature  of  business  conducted  by  such  corporations, 
and  the  name  of  each  and  every  agent  of  each  of  such  cor- 
porations, if  any  there  be,  and  the  places  of  residence  of  such 
agents.     [Cd.  1881,  sec.  2483  ;  1  H.  C,  §  1529  ;  Bal.,  §  4296.] 

§  459a.     Recording  Fees. 

[§3728,  Rem.-Bal.]  The  fees  for  recording,  under  the 
provisions  of  this  chapter,  shall  be  the  same  as  are  allowed 
by  law  to  the  Secretary  of  State  for  certified  copies  of  papers 
on  file  in  his  office.  [Cd.  1881,  §  2484;  1  H.  C,  §  1530;  Bal., 
§  4297.] 

§  460.    Agent's  Liability. 

[§  3729,  Rem.-Bal.]  Any  agent  of  any  foreign  corpora- 
tion conducting  or  carrying  on  business  within  the  limits  of 
this  state,  for  and  in  the  name  of  such  corporation,  contrary 
to  any  of  the  provisions  of  this  chapter,  shall  be  deemed  guilty 
of  a  misdemeanor,  and  upon  conviction  thereof,  shall  be  pun- 
ished by  a  fine  not  exceeding  two  hundred  dollars,  or  by  im- 
prisonment in  the  county  jail  for  a  term  not  exceeding  three 
months,  or  by  both  such  fine  and  imprisonment.  [Cd.  1881, 
§  2485 ;  1  H.  C,  §  1531 ;  Bal,  §  4298.] 


307  FOREIGN   CORPORATIONS.  §  461 

§  461.     County  Officers'  Liability. 

[§  3730,  Rem.-Bal.]  Any  county  assessor  failing  to  make 
out  and  deliver  to  the  county  auditor  of  his  county  a  list 
within  the  time  and  in  the  manner  provided  in  section  2485, 
[Rem.-Bal.,  §  3726]  and  any  county  auditor  failing  to  make 
out  and  transmit  to  the  Secretary  of  State  a  statement,  within 
the  time  and  in  the  manner  provided  in  section  2482  [Rem.- 
Bal.,  §  3727]  shall  be  deemed  guilty  of  a  misdemeanor,  and, 
upon  conviction  thereof,  shall  be  punished  by  a  fine  not  exceed- 
ing three  hundred  dollars.  [Cd.  1881,  §  2486 ;  1  H.  C,  §  1532 ; 
Bal.,  §  4299.] 


§  462  EXISl'ING    CORPORATION   LAWS,    1913.  308 


RIGHT  OF  EMINENT  DOMAIN  BY 
CORPORATION. 

§  462.     Right  to  Appropriate  Water  and  Build  Dams,  etc. 

[§  9509,  Rem.-BaL]  Any  person  or  persons,  or  company 
now  incorporated,  or  that  may  hereafter  become  incorporated 
under  the  laws  of  this  state,  for  the  purpose  of  mining  or 
manufacturing,  shall  have  the  right  to  purchase  or  appropri- 
ate and  take  possession  of  and  divert  from  its  natural  chan- 
nel, and  use  and  hold  the  waters  of  any  river,  creek  or 
stream  in  this  state  that  may  be  required  for  the  mining 
and  manufacturing  purposes  of  any  such  person  or  persons, 
corporation  or  corporations,  and  to  construct  all  dams, 
canals,  reservoirs,  ditches,  pipes,  flumes  and  aqueducts  suit- 
able and  necessary  for  the  controlling,  directing,  and  running 
such  waters  to  their  mines  or  manufacturing  establishments 
of  any  such  person  or  persons,  corporation  or  corporations, 
where  the  same  may  be  intended  to  be  utilized  for  such  pur- 
poses: Provided,  that  no  such  appropriation  or  diversion  of 
the  water  of  any  such  river,  creek,  or  stream  from  its  natural 
channel,  nor  shall  any  such  dam,  canal,  reservoir,  ditch,  pipe, 
flume  or  aqueduct  be  constructed,  to  the  detriment  of  any 
person  or  persons,  corporation  or  corporations,  occupying  the 
lands  or  being  located  below  the  point  or  place  of  such  ap- 
propriation or  diversion  on  any  such  stream  or  its  tributaries, 
or  above  or  below  such  dam,  canal,  reservoir,  ditch,  pipe, 
flume,  or  aqueduct,  or  the  owners  of  the  land  through  which 
the  waters  run  in  the  natural  course  for  the  deprivation  of 
the  same,  or  the  owners  of  the  land  through  or  upon  which 
such  dam,  canal,  reservoir,  ditch,  pipe,  flume,  or  aqueduct 
may  pass  through  or  over,  or  be  situated  upon,  unless  just 
and  adequate  compensation  be  previously  ascertained  and 
paid  therefor.  [Laws  1879,  §  1,  p.  124;  1  H.  C,  §  1589 ;  Bal., 
§  4281.] 


309  RIGETT   OF   EMINENT   DOMAIN   BY    CORPORATION.       §  463 

A  company  may  condemn  land  in  accordance  with  its  special  char- 
ter or  subsequent  general  law.  (Cascades  R.  Co.  v.  Johns,  1  Wash. 
Ter.  557.) 

Water  for  manufacturing  purposes  not  public  use.  (State  ex  rel. 
Tacoma  Indust.  Co.  v.  White  River  Power  Co.,  39  Wash.  648,  82  Pac. 
150;  Sievers  v.  Dalles  P.  &  A.  Nav.  Co.,  24  Wash.  302,  64  Pac.  539.) 

§  463.     Appropriation — Procedure — Petition — Requisites  of. 

[§  921,  Rem.-Bal.]  Any  corporation  authorized  by  law  to 
appropriate  land,  real  estate,  premises,  or  other  property  for 
right  of  way  or  any  other  corporate  purposes,  may  present  to 
the  superior  court  of  the  county  in  which  any  land,  real  estate, 
premises,  or  other  property  sought  to  be  appropriated  shall 
be  situated,  or  to  the  judge  of  such  superior  court,  in  any 
county  where  he  has  jurisdiction  or  is  holding  court,  a  peti- 
tion in  which  the  land,  real  estate,  premises,  or  other  prop- 
erty sought  to  be  appropriated,  shall  be  described  with 
reasonable  certainty,  and  setting  forth  the  name  of  each  and 
every  owner,  encumbrancer  or  other  person  or  party  in- 
terested in  the  same,  or  any  part  thereof,  so  far  as  the  same 
can  be  ascertained  from  the  public  records,  the  object  for 
which  the  land  is  sought  to  be  appropriated,  and  praying 
that  a  jury  be  impaneled  to  ascertain  and  determine  the  com- 
pensation to  be  made  in  money,  irrespective  of  any  benefit 
from  any  improvement  proposed  by  such  corporation,  to  such 
owner  or  owners,  respectively,  and  to  all  tenants,  encum- 
brancers, and  others  interested,  for  the  taking  or  injuriously 
affecting  such  lands,  real  estate,  premises,  or  other  property, 
or  in  case  a  jury  be  waived,  as  in  other  civil  cases  in  courts 
of  record  in  the  manner  prescribed  by  law,  then  that  the  com- 
pensation to  be  made,  as  aforesaid,  be  ascertained  and  de- 
termined by  the  court,  or  judge  thereof.  [Laws  1890,  §  1, 
p.  294;  2  H.  C,  §  648;  Bal.,  §  5637.] 

Taking  of  land  by  eminent  domain  not  strictly  action  in  rem. 
(Smith's  Petition,  9  Wash.  85,  37  Pac.  311,  494.) 

Taking  of  private  property  for  public  use  one  of  the  recognized 
powers  of  sovereignty.  (Samish  River  Boom  Co.  v.  Union  Boom  Co., 
32  Wash.  586,  73  Pac.  670.) 

Statutes  authorizing  condemnation  are  strictly  construed.  (Spo- 
kane v.  Colby,  16  Wash.  610,  48  Pac.  248;   Seattle  v.  Fidelity  Trust 


§  463  EXISTING   CORPORATION   LAWS,    1913.  310 

Co.,   22  Wash.   154,  60  Pac.   133;   State  v.  Superior  Court,  Chelan,   36 
Wash.  381,  78  Pac.  1011.) 

One  company  cannot  condemn  for  another.  (Seattle  &  M.  R.  Co.  v. 
State,  7  Wash.  150,  34  Pac.  551.) 

PUBLrC  USE. 

Boom  companies  are  quasi  public  and  may  be  given  right  to  con- 
demn.    (North  River  Boom  Co.  v.  Smith,  15  Wash.  138,  45  Pac.  750.) 

Ballinger's  Code,  section  4379,  gives  boom  company  right  to  con- 
demn the  land  selected  in  its  "plat  of  survey."  (Samish  River  Boom 
Co.  V.  Union  Boom  Co.,  32  Wash.  586,  73  Pac.  670.) 

Railroad  company  constructing  its  road  will  be  protected  from  ap- 
propriation of  its  terminals.  (State  ex  rel.  Spokane  Falls  &  N.  R. 
Co.  V.  Superior  Court,  40  Wash.  389,  82  Pac.  417.) 

Question  of  public  use  is  judicial  question  determined  by  character, 
not  extent  of  use.  (Peterson  v.  Smith,  6  Wash.  163,  32  Pac,  1050; 
Healy  Lumber  Co.  v.  Morris,  33  Wash.  490,  74  Pac.  681;  Samish  River 
Boom  Co.  V.  Union  Boom  Co.,  32  Wash.  586,  73  Pac.  670;  State  ex  rel. 
Ami  Co.  V.  Superior  Court,  42  Wash.  675,  85  Pac.  669;  North  River 
Boom  Co.  V.  Smith,  15  Wash.  138,  45  Pac.  750;  Lewis  County  v. 
Gordon,  20  Wash.  80,  54  Pac.  779.) 

The  use  in  eminent  domain  must  be  by  the  public  or  some  quasi- 
public  agency.  (Healy  Lumber  Co.  v.  Morris,  33  Wash.  490,  74  Pac. 
681.) 

Water  for  manufacturing  purposes  not  public  use.  (State  ex  rel. 
Tacoma  Indust.  Co.  v.  White  River  Power  Co.,  39  Wash.  648,  82  Pac. 
150.) 

Street  railway  public  use.  (State  ex  rel.  Harlan  v.  Centralia  Co., 
42  Wash.  632,  85  Pac.  344.) 

Sale  of  electric  power  to  public  not  public  use.  (State  ex  rel. 
Harris  v.  Superior  Court,  42  Wash.  660,  85  Pac.  666.) 

Highway  or  public  street  is  public  use.  (State  ex  rel.  Schroeder  v. 
Superior  Court,  29  Wash.  1,  69  Pac.  366;  State  ex  rel.  Thomas  v. 
Superior  Court,  42  Wash.  521,  85  Pac.  256.) 

Right  of  way  for  logging  roads  and  lumbering  purposes  not  public 
use.  (Healy  Lumber  Co.  v.  Morris,  33  Wash.  490,  74  Pac.  681; 
Matthews  v.  Belfast  Mfg.  Co.,  35  Wash.  662,  77  Pac.  1046.) 

Right  of  way  for  railroad  public  use.  (State  ex  rel.  Smith  v. 
Superior  Court,  30  Wash.  219,  70  Pac.  484;  State  ex  rel.  Trimble  v. 
Superior  Court,  31  Wash.  445,  72  Pac.  89;  State  ex  rel.  Harlan  v.  Cen- 
tralia Co.,  42  Wash.  632,  85  Pac.  344.) 

Boom  company  public  carrier  of  logs  as  distinguished  from  private 
company  is  quasi  public  and  may  condemn  land  for  its  public  use. 
(North  River  Boom  Co.  v.  Smith,  15  Wash.  138,  45  Pac.  750;  Matthews 
V.  Belfast  Mfg.  Co.,  35  Wash.  662,  77  Pac.  1046.) 


311  RIGHT  OF  EMINENT  DOMAIN  BY  CORPORATION.  §  463 

Irrigation  ditch  is  public  use.  (Prescott  Trr.  Co.  v.  Flathers,  20 
Wash.  454,  55  Pac.  635;  Weed  v.  Goodwin,  36  Wash.  31,  78  Pac.  36.) 

Levees  and  dikes  a  public  use.  (Hansen  v.  Hammer,  15  Wash.  315, 
46  Pac.  332.) 

Drainage  of  lands  public  use.  (Lewis  County  v.  Gordon,  20  Wash. 
^  80,  54  Pac.  779.) 

Tide  lands,  school  lands  or  other  public  property  may  not  be  taken 
by  condemnation.  (Seattle  &  M.  E.  Co.  v.  State,  7  Wash.  150,  34 
Pac.  551;  North  River  Boom  Co.  v.  Smith,  15  Wash.  138,  45  Pac.  750; 
Samish  Boom  Co.  v.  Callvert,  27  Wash.  611,  68  Pac.  367;  State  ex 
rel.  Trimble  v.  Superior  Court,  31  Wash.  445,  72  Pac.  89.) 

One  public  or  quasi-public  corporation  may  condemn  property  of 
another  not  interfering  with  the  public  use  by  the  latter  company, 
e.  g.,  railroad  crossings  and  connections.  (Seattle  &  M.  R.  Co.  v.  Bel- 
lingham  Bay  &  E.  R.  Co.,  29  Wash.  491,  69  Pac.  1107;  Samish  River 
Boom  Co.  V.  Union  Boom  Co.,  32  Wash.  586,  73  Pac.  670;  Seattle  &  M. 
R.  Co.  v.  State,  7  Wash.  150,  34  Pac.  551;  State  ex  rel.  Spokane  Falls  & 
N.  R.  Co.  v.  Superior  Court,  40  Wash.  389,  82  Pac.  417.) 

Section  6326,  Remington  and  Ballinger's  Code,  authorizing  condemna- 
tion of  land  for  irrigation  ditches  by  private  owner,  constitutional. 
(State  ex  rel.  Galbraith  v.  Superior  Court,  59  Wash.  621,  110  Pac.  429.) 

A  private  use  incidental  to  the  public  use  does  not  deprive  a  com- 
pany of  right  of  condemnation.  (State  ex  rel.  Harris  v.  Olympia 
L.  &  P.  Co.,  46  Wash.  511,  90  Pac.  656;  State  ex  rel.  Burrows  v. 
Superior  Court,  48  Wash.  277,  93  Pac.  423;  State  ex  rel.  Shropshire 
V.  Superior  Court,  51  Wash  386,  99  Pac.  3;  State  ex  rel.  Dominick 
V.  Superior  Court,  52  Wash.  196,  100  Pac.  317;  State  ex  rel.  Mcintosh 
T.  Superior  Court,  56  Wash.  214,  105  Pac.  637;  Tacoma  v.  Nisqually 
Power  Co.,  57  Wash.  420.  107  Pac.  199;  State  ex  rel.  Clark  v.  Superior 
Court,  62  Wash.  612,  114  Pac.  444.) 

A  county  road  or  an  alley  is  a  public  use.  (State  ex  rel.  Jones  v. 
Superior  Court,  44  Wash.  476,  87  Pac.  521;  State  ex  rel.  Paget  v. 
Superior  Court,  47  Wash.  11,  91  Pac.  241.) 

The  public  use  of  a  right  of  way  not  affected  by  the  agreement  of 
railway  company  as  health  requirement  not  to  maintain  stations 
thereon.  (State  ex  rel.  Kent  Lumber  Co.  v.  Superior  Court,  46  Wash. 
516,  90  Pac.  663.) 

A  railway  terminal  company  connecting  business  establishments  with 
terminals  by  tracks  and  ferries  is  a  railroad  company  entitled  to 
exercise  right  of  eminent  domain.  (State  ex  rel.  Milwaukee  Term. 
R.  Co.  V.  Superior  Court,  54  Wash.  365,  103  Pac.  469,  104  Pac.  175.) 

Toll-logging  road  as  public  carrier  is  public  use.  (State  ex  rel. 
Clark  V.  Superior  Court,  62  Wash.  612,  114  Pac.  444.) 

Use  of  banks  of  stream  by  boom  company  for  artificial  freshets  is 
public  use.     (State   ex   rel.   Wilson  v,   Superior  Court,  47   Wash.  397, 


§  463  EXISTING    CORPORATION   LAWS,    1913.  312 

92  Pac.  2G9;  State  ex  rel.  Pealer  v.  Superior  Court,  58  "Wash.  565, 
109  Pac.  340.) 

Land  necessary  for  freight  warehouse  for  railroad  is  public  use. 
(State  ex  rel.  True  v.  Superior  Court,  56  Wash.  249,  105  Pac.  639.) 

Right  of  way  of  private  railroad  may  be  condemned.  (State  ex 
rel.  Kent  Lumber  Co.  v.  Superior  Court,  46  Wash.  516,  90  Pac.  663.) 

Remington  &  Ballinger's  Code,  sections  5717,  5718,  authorizing  con- 
demnation by  railroads,  do  not  authorize  condemnation  of  city  street. 
(State  ex  rel.  Schade  Brew.  Co.  v.  Superior  Court,  62  Wash.  96,  113 
Pac.  576.) 

Property  already  devoted  to  public  use  may  be  condemned  where 
necessary.  (Tacoma  v.  Nisqually  Power  Co.,  57  Wash.  420,  107  Pac. 
199;  State  ex  rel.  Columbia  Valley  R.  Co.  v.  Superior  Court,  45  Wash. 
316,  88  Pac.  332;  North  Coast  R.  v.  Northern  Pac.  R.  Co.,  48  Wash. 
529,  94  Pac.  112;  State  ex  rel.  Milwaukee  Terminal  R.  Co.  v.  Superior 
Court,  54  Wash.  365,  103  Pac.  469,  104  Pac.  175;  State  ex  rel.  Everett  & 
Cherry  Valley  Tr.  Co.  v.  Superior  Court,  59  Wash.  598,  110  Pac. 
428;  State  ex  rel.  Portland  &  Seattle  R.  Co.  v.  Superior  Court,  45 
Wash.  270,  88  Pac.  201;  State  ex  rel.  Kent  Lumber  Co.  v.  Superior 
Court,  46  Wash.  516,  90  Pac.  663;  State  ex  rel.  North  Coast  R.  v. 
Northern  Pacific  R.  Co.,  49  Wash.  78,  94  Pac.  907.) 

Riparian  rights  on  navigable  and  non-navigable  waters  may  be 
condemned  under  Ballinger's  Code,  section  4143,  except  so  far  as 
needed  by  owner  for  irrigation  of  his  own  lands.  (State  ex  rel. 
Kettle  Falls  etc.  Co.  v.  Superior  Court,  46  Wash.  500,  90  Pac.  650; 
State  ex  rel.  Burrows  v.  Superior  Court,  48  Wash.  277,  93  Pac.  423; 
State  ex  rel.  Wilson  v.  Gray's  Harbor  etc.  R.  Co.,  60  Wash.  32,  110 
Pac.  676;  State  ex  rel.  Liberty  Lake  Irr.  Co.  v.  Superior  Court,  47 
Wash.  310,  91  Pac.  968;  Spokane  Valley  Land  &  Water  Co.  v.  Jones 
&  Co.,  53  Wash.  37,  101  Pac.  515.) 

TAKING  OF  PRIVATE  PROPERTY. 

The  entire  fees  or  such  interest  as  is  necessary  may  be  condemned. 
(Oregon  R.  &  Nav.  Co.  v.  Owsley,  3  Wash.  Ter.  38,  13  Pac.  186; 
Nicomen  Boom  Co.  v.  North  Shore  Boom  Co.,  40  Wash.  315,  82  Pac. 
412.) 

Word  "damaged"  in  constitution,  article  1,  section  16,  does  not 
mean  same  as  "taken."  (Brown  v.  Seattle,  5  Wash.  35,  31  Pac.  313, 
32  Pac.  214.) 

What  is  taking  is  judicial  question.  (Bowes  v.  Aberdeen,  58  Wash. 
535,  109  Pac.  369.) 

Building  of  wharves  on  shores  of  navigable  waters  neither  taking 
nor  damaging.     (Eisenbach  v.  Hatfield,  2  Wash.  236,  26  Pac.  539.) 

Construction  of  slopes  on  abutting  property  on  lowering  grade  of 
street  is  damaging,  not  taking.  (Compton  v.  Seattle,  38  Wash.  514, 
80  Pac.  757.) 


313  RIGHT  OP  EMINENT  DOMAIN  BY  CORPORATION.  §  463 

A  statute  authorizing  the  taking  of  private  property  without  assess- 
ment of  damages  or  payment  of  compensation  is  unconstitutional. 
(Askham  v.  King  County,  9  Wash.  1,  36  Pac.  1097;  Skagit  County  v. 
Stiles,  10  Wash.  388,  39  Pac.  116;  Snohomish  County  v.  Hayward,  11 
Wash.  429,  39  Pac.  652.) 

The  property  owner  has  the  constitutional  right  to  have  compen- 
sation paid  before  his  property  is  taken.  (Peterson  v.  Smith,  6  Wash. 
163,  32  Pac.  1060;  In  re  Smith's  Petition,  9  Wash.  85,  37  Pac.  311, 
494;  Puyallup  v.  Lacey,  43  Wash.  110,  86  Pac.  215;  Adams  County  v. 
Dobschlag,  19  Wash.  356,  53  Pac.  339 ;  Olson  v.  Seattle,  30  Wash.  687,  71 
Pac.  201.) 

A  property  owner  may  waive  his  right  to  compensation.  (Oregon 
E.  &  Nav.  Co.  V.  Owsley,  3  Wash.  Ter.  38,  13  Pac.  186;  Oregon  R.  & 
Nav.  Co.  v.  Day,  3  Wash.  Ter.  252,  14  Pac.  588;  Lewis  v.  Seattle,  5 
Wash.  741,  32  Pac.  794;  Kaufman  v.  Tacoma,  O.  &  G.  H.  E.  Co.,  11 
Wash.  632,  40  Pac.  137.) 

A  lessee  of  land  has  property  right  for  which  he  is  entitled  to  dam- 
ages in  condemnation  by  railroad.  (Seattle  &  M.  R.  Co.  v.  Scheike, 
3  Wash.  625,  29  Pac.  217,  30  Pac.  503.) 

So  has  a  vendee  in  contract  for  state  tide  lands.  (State  ex  rel. 
Trimble  v.  Superior  Court,  31  Wash.  445,  72  Pac.  89.) 

So  a  claimant  under  timber  culture  entry.  (Yakima  County  t. 
Tullar,  3  Wash.  Ter.  393,  17  Pac.  885.) 

So  a  claimant  under  pre-emption  entry  of  public  lands.  (Enoch 
V.  Spokane  Falls  etc.  E.  Co.,  6  Wash.  393,  33  Pac.  966.) 

So  an  abutting  owner's  easement  of  light,  air  and  access  to  street. 
(State  ex  rel.  Smith  v.  Superior  Court,  30  Wash.  219,  70  Pac.  484.) 

COMPENSATION. 

Injunction  will  issue  to  restrain  the  taking  of  private  property  for 
public  use  without  first  making  compensation.  (Brown  v.  Seattle, 
5  Wash.  35,  31  Pac.  313,  32  Pac.  214;  Olson  v.  Seattle,  30  Wash.  687,  71 
Pae.  201;  Swope  v.  Seattle,  36  Wash.  113,  78  Pac.  607;  Seattle  Transfer 
Co.  v.  Seattle,  27  Wash.  520,  68  Pac.  90.) 

Elements  of  compensation  in  condemnation:  Destruction  of  valuable 
springs.  (Yakima  County  v.  Tullar,  3  W^ash.  Ter.  393,  17  Pac.  885.) 
Discharge  of  water  on  owner's  premises.  (Wendel  v.  Spokane  Co., 
27  Wash.  121,  67  Pae.  576.)  Obstruction  of  stream  of  water.  (Seat- 
tle &  M.  E.  Co.  V.  Boeder,  30  Wash.  244,  70  Pac.  498.)  Obstruction 
of  access  to  property.  (Patton  v.  Olympia  Door  etc.  Co.,  15  Wash. 
210,  46  Pac.  237;  Hatch  v.  Tacoma  etc.  E.  Co.,  6  Wash.  1,  32  Pac. 
1063;  Schwede  v.  Hemrich  Bros.  Brew.  Co.,  29  Wash.  21,  69  Pac. 
362.)  Obstruction  of  light  and  air.  (Brown  v.  Seattle,  5  Wash.  35, 
31  Pac.  313,  32  Pac.  214;  State  ex  rel.  Smith  v.  Superior  Court,  26  Wash. 
278,  66  Pac.  385;  Seattle  Transfer  Co.  v.  Seattle,  27  Wash.  520,  68 
Pac.  90.)     Fencing  and  crossings  made  necessary  by  the  condemnation. 


§  4-63  EXISTING    CORPORATION   LAWS,    1913.  314 

(Seattle  &  M.  E.  Co.  v.  Gilchrist,  4  Wash.  509,  30  Pac.  738;  Seattle  & 
Mont.  R.  Co.  V.  MurpMne,  4  Wash.  448,  30  Pac.  720.)  Soot,  cinders, 
smoke,  odors,  vibration.  (Smith  v.  St.  Paul  etc.  R.  Co.,  39  Wash.  355, 
81  Pac.  840.)  New  use  as  telephone  line  in  addition  to  pipe-line.  (Spo- 
kane V.  Colby,  16  Wash.  610,  48  Pac.  248.)  Itestruction  of  growing 
crops.  (Seattle  &  M.  R.  Co.  v.  Scheike,  3  Wash.  625,  29  Pac.  217,  30  Pac. 
503.)  Value  for  special  use.  (Seattle  &  M.  E.  Co.  v.  Murphine,  4 
Wash.  448,  30  Pac.  720;  Seattle  &  M.  R.  Co.  v.  Roeder,  30  Wash.  244, 
70  Pac.  498.) 

Owner  by  stipulating  compensation  waives  objection  and  rights. 
(Pearl  Oyster  Co.  v.  Seattle  &  Montana  R.  Co.,  53  Wash.  101,  101 
Pac.  503.) 

Owner  of  tide  lands  entitled  to  compensation  for  the  lands  taken, 
the  damage  to  lands  not  taken  and  the  value  of  statutory  lease  rights, 
and  immaterial  that  owner  became  such  after  proceedings  begun. 
(State  ex  rel.  Hulme  v.  Gray's  Harbor  etc.  R.  Co.,  54  Wash.  530,  103 
Pac.  809.) 

Current  for  water  power  being  destroyed  is  element  of  damages. 
(Inland  Empire  R.  Co.  v.  McKinley,  48  Wash.  675,  94  Pac.  644.) 

Boom-site  on  tide  lands  not  appurtenant  to  uplands  and  its  value 
not  assessable  as  damages.  (Gray's  Harbor  Boom  Co.  v.  Lownsdale, 
54  Wash.  83,  102  Pae.  1041,  104  Pac.  267.) 

Otherwise  where  defendants  own  the  shore.  (Columbia  etc.  Co.  v. 
Hutchinson,  56  Wash.  323,  105  Pac.  636.) 

Right  of  ingress  and  egress  to  lots  abutting  on  a  street  is  property 
to  be  compensated.  (Lund  v.  Idaho  etc.  R.,  50  Wash.  574,  97  Pac. 
665.) 

Remote  damage  not  compensated.  (Chicago  M.  &  St.  P.  R.  Co.  v 
Alexander,  47  Wash.  131,  91  Pac.  626;  Gray's  Harbor  Boom  Co.  v 
Lownsdale,  54  Wash.  83,  102  Pac.  1041,  104  Pac.  267.) 

Abutting  owner's  interest  in  maintenance  of  street  must  be  com 
pensated.  (Brazell  v.  Seattle,  55  Wash.  180,  104  Pac.  155;  Smith  v. 
Centralia,  55  Wash.  573,  104  Pac.  797.) 

Neighboring  property  not  abutting  street  or  right  of  way  not  enti 
tied  to  compensation.  (In  re  Fifth  Avenue,  62  Wash.  218,  113  Pac 
762;  Clute  v.  North  Yakima  etc.  R.  Co.,  62  Wash.  531,  114  Pac.  513.) 

Measure  of  compensation  is  the  value  of  lands  taken  irrespective  of 
benefits  and  damage  to  lands  not  taken  (Olympia  Light  &  Power 
Co.  V.  Harris,  58  Wash.  410,  108  Pac.  940;  Gray's  Harbor  etc.  Co.  v. 
Kauppinen,  53  Wash.  238,  101  Pac.  835);  but  Remington  and  Bal- 
linger's  Code,  section  7725,  does  not  authorize  compensation  for  dam- 
age to  contiguous  lot  appropriated  to  distinct  use.  (Seattle  v.  Atwood, 
59  Wash.  112,  109  Pac.  326.) 

The  constitutional  requirement,  article  1,  section  16,  that  property 
taken  or  damaged  be  paid  for  irrespective  of  benefits,  does  not  apply 


315  RIGHT  OF  EMINENT  DOMAIN  BY  CORPORATION.  §  463 

to  county  road.  (Kitsap  County  v.  Melker,  50  Wash.  29,  96  Pac.  69.5; 
Tacoma  v.  Wetherby,  57  Wash.  295,  106  Pac.  903.) 

Award  of  damages  in  condemnation  draws  interest  from  verdict  to 
entry  of  judgment.  (North  Coast  E.  Co.  v.  Aumiller,  61  Wash.  271, 
112  Pac.  384.) 

As  between  two  public  service  companies  seeking  condemnation  of 
the  same  lands,  the  one  prior  in  time  is  prior  in  right.  (State  ex  rel. 
Cascade  etc.  Co.  v.  Superior  Court,  53  Wash.  321,  101  Pac.  1094;  State 
ex  rel.  Kettle  Falls  etc.  Co.  v.  Superior  Court,  46  Wash.  500,  90  Pac. 
650.) 

Where  owners  had  been  compensated  by  legislative  act,  they  were 
held  not  entitled  to  compensation  in  condemnation  proceedings. 
(Lewis  County  v.  McGeorge,  47  Wash.  414,  92  Pac.  268.) 

Measure  of  damages  in  condemnation  is  fair  market  value  of  land 
taken  at  time  of  appropriation,  though  enhanced  by  the  proposed 
improvement,  together  with  damage  to  land  not  taken,  irrespective  of 
benefits  from  the  improvement.  (Enoch  v.  Spokane  Falls  etc.  E.  Co., 
6  Wash.  393,  33  Pac.  966;  Seattle  &  M.  E.  Co.  v.  Boeder,  30  Wash. 
244,  70  Pac.  498.) 

PEOCEDUEE. 

A  person  in  possession  must  be  made  a  party  defendant  and  notice 
must  be  given  to  all  interested  parties.  (Owen  v.  St.  Paul  etc.  E. 
Co.,  12  Wash.  313,  41  Pac.  44;  Chehalis  County  v.  Ellingson,  21  Wash. 
638,  59  Pac.  485;  Weed  v.  Goodwin,  36  Wash.  31,  78  Pac.  36;  State 
ex  rel.  Trimble  v.  Superior  Court,  31  Wash.  445,  72  Pac.  89.) 

Service  may  be  made  by  publication  where  personal  service  impos- 
sible. (Moynahan  v.  Superior  Court,  42  Wash.  172,  84  Pac.  655;  State 
ex  rel.  Thomas  v.  Superior  Court,  42  Wash.  521,  85  Pac.  256.) 

Petition  sufficient  if  it  plainly  notifies  defendants  of  the  issues. 
(Lewis  County  v.  Schobey,  31  Wash.  357,  71  Pac.  1029;  Chelan  County 
V.  Navarre,  38  Wash.  684,  80  Pac.  845.) 

No  plea  or  answer  is  necessary.  (Seattle  &  M.  E.  Co.  v.  Murphine, 
4  Wash.  448,  30  Pac.  720;  State  ex  rel.  Ami  Co.  v.  Superior  Court, 
42  Wash.  675,  85  Pac.  669.) 

The  petitioner  company  has  the  burden  of  proof  and  the  right  to 
open  and  close.  (Bellingham  Bay  etc.  E.  Co.  v.  Strand,  4  Wash.  311, 
30  Pac.  144;  Seattle  &  M.  E.  Co.  v.  Murphine,  4  Wash.  448,  30  Pac. 
720;  Seattle  &  M.  E.  Co.  v,  Gilchrist,  4  Wash.  509,  30  Pac.  738.) 

It  is  within  the  discretion  of  the  court  to  permit  the  jury  to  view 
the  premises.  (Bellingham  Bay  etc.  E.  Co.  v.  Strand,  4  Wash.  311,  30 
Pac.  144;  Seattle  &  M.  E.  Co.  v.  Eoeder,  30  Wash.  244,  70  Pac.  498.) 

Question  of  future  damages  may  be  submitted  to  the  jury.  (Swope 
▼.  Seattle,  36  Wash.  113,  78  Pac.  607.) 

Assessment  of  damages  by  commissioners  unconstitutional.  Ques- 
tion of  damages  must  be  submitted  to  jury.  (Peterson  v.  Smith,  6 
Wash,  163,  32  Pac.  1050;  In  re  Smith's  Petition,  9  Wash.  85,  37  Pac. 


§  463  EXISTING   CORPORATION  LAWS,    1913.  316 

311,  494;  Seanor  v.  County  Commrs.,  13  Wash.  48,  42  Pac.  552;  Sno- 
homish County  V.  Hayward,  11  Wash.  429,  39  Pac.  652.) 

Petitioner  may  abandon  proceedings  for  condemnation  before  pos- 
session taken  but  not  after  possession  taken  and  verdict.  (Port 
Angeles  Pac.  R.  Co.  v.  Cooke,  38  Wash.  184,  80  Pac.  305;  Bellingham 
Bay  B.  C.  R.  Co.  r.  Strand,  14  Wash.  144,  44  Pac.  140,  46  Pac.  238.) 

APPEALS. 

Appeals  must  be  taken  in  compliance  with  the  provision  therefor 
in  the  condemnation  law;  not  governed  by  the  general  law.  (Western 
American  Co.  v.  St.  Ann  Co.,  22  Wash.  158,  60  Pac.  158;  Seattle  & 
M.  R.  Co.  v.  O'Meara,  4  Wash.  17,  29  Pac.  835;  Pearson  v.  Island 
County,  3  Wash.  497,  28  Pac.  1108.) 

Certiorari  will  lie  to  review  questions  in  condemnation  proceedings 
only  where  they  cannot  be  reviewed  on  appeal.  (Seattle  &  M.  R.  Co. 
V.  State,  5  Wash.  807,  32  Pac.  744;  Parker  v.  Superior  Court,  25 
Wash.  544,  66  Pac.  154;  Seattle  &  M.  R.  Co.  v.  Bellingham  etc.  R.  Co., 

29  Wash.  491,  69  Pac.  1107;   State   ex  rel.   Smith  v.  Superior  Court, 

30  Wash.  219,  70  Pac.  484;   State. ex  rel.  Trimble  v.  Superior  Court, 

31  Wash.  445,  72  Pac.  89;  Samish  River  Boom  Co.  v.  Union  Boom 
Co.,  32  Wash.  586,  73  Pac.  670;  Healy  Lumber  Co.  v.  Morris,  33  Wash. 
490,  74  Pac.  681;  State  ex  rel.  Morrell  v.  Superior  Court,  33  Wash. 
542,  74  Pac.  686;  State  ex  rel.  Nelson  v.  Superior  Court,  31  Wash. 
32,  71  Pac.  601;  State  ex  rel.  Ami  Co.  v.  Superior  Court,  42  Wash. 
675,  85  Pac.  669;  State  ex  rel.  Alexander  v.  Superior  Court,  42  Wash. 
684,  85  Pac.  673;  State  ex  rel.  Young  v.  Superior  Court,  43  Wash. 
34,  85  Pac.  989;  State  ex  rel.  McCormick  v.  Superior  Court,  43  Wash. 
91,  86  Pac.  205.) 

MISCELLANEOUS. 

Costs  in  condemnation  proceedings  are  taxed  against  the  petitioner, 
not  against  nonassenting  owner.  (Owsley  v.  Oregon  R.  &  Nav.  Co., 
1  Wash.  491,  20  Pac.  782;  Adams  County  v.  Dobschlag,  19  Wash.  356, 
53  Pac.  339;  Lewis  County  v.  Schobey,  31  Wash.  357,  71  Pac.  1029.) 

Statutes  of  eminent  domain  are  strictly  construed.  (North  Coast 
R.  Co.  V.  Aumiller,  61  Wash.  271,  112  Pac.  384.) 

A  private  company  generating  power  to  be  sold  at  profit  cannot, 
by  offering  to  serve  the  public,  acquire  right  of  eminent  domain. 
(State  ex  rel.  Tolt  Power  etc.  Co.  v.  Superior  Court,  50  Wash.  13, 
96  Pac.  519.) 

An  abutter  on  street  whose  interests  are  being  condemned  by  rail- 
road company  has  interest  to  question  right  of  condemnation.  (State 
ex  rel.  Sylvester  v.  Superior  Court,  60  Wash.  279,  111  Pac.  19.) 

City  council  proper  authority  to  determine  question  of  public  use 
and  necessity.  (Seattle  v.  Byers,  54  Vv'ash.  518,  103  Pac.  791;  Tacoma 
v.  Titlow,  53  Wash.  217,  101  Pac.  827;  In  re  Mercer  St.,  55  Wash.  116, 
104  Pac.  133.) 


317  RIGHT  OF  EMINENT  DOMAIN  BY  CORPORATION.  §  464 

Section  4250,  Ballinger's  Code,  that  no  railroad  company  shall  con- 
demn land  until  the  whole  of  its  capital  stock  subscribed,  is  rule  of 
public  policy  and  not  waived  by  failure  of  owner  to  set  up  the  defect. 
(State  ex  rel.  Hulme  v.  Gray's  Harbor  etc.  R.  Co.,  54  Wash.  530,  103 
Pac.  809.) 

A  town  may  condemn  land  for  an  alley  on  its  own  initiative  and 
petition  by  majority  of  property  owners  affected  not  jurisdictional 
prerequisite.  (State  ex  rel.  Jones  v.  Superior  Court,  44  Wash.  476,  87 
Pac.  521.) 

A  railroad  company  cannot  condemn  an  abutter's  interest  in  a  city 
street  without  first  obtaining  a  franchise  from  the  city  to  use  the 
streets.  (State  ex  rel.  Sylvester  y.  Superior  Court,  60  Wash.  279,  111 
Pac.  19;  State  ex  rel.  Schade  Brew.  Co.  v.  Superior  Court,  62  Wash. 
96,  113  Pac.  576.) 

Attempt  to  agree  with  owner  not  condition  precedent  to  condemna- 
tion. (State  ex  rel.  Skamania  Boom  Co.  v.  Superior  Court,  47  Wash. 
166,  91  Pac.  637;  State  ex  rel,  Wilson  v.  Superior  Court,  47  Wash. 
397,  92  Pac.  269;  State  ex  rel.  Burrows  v.  Superior  Court,  48  Wash. 
277,  93  Pac.  423.) 

Laches  in  building  line  no  defense  in  condemnation  proceedings. 
(State  ex  rel.  Mcintosh  v.  Superior  Court,  56  Wash.  214,  105  Pac.  637.) 

A  person  in  possession  must  be  made  a  party  defendant  and  notice 
must  be  given  all  interested  parties.  (Owen  v.  St.  Paul  etc.  R.  Co., 
12  Wash.  313,  41  Pac.  44;  Chehalis  County  v.  Ellingson,  21  Wash.  638, 
59  Pac.  485;  Weed  v.  Goodwin,  36  Wash.  31,  78  Pac.  36;  State  ex 
rel.  Trimble  v.  Superior  Court,  31  Wash.  445,  72  Pac.  89.) 

Notice  is  properly  served  on  mortgagee  lien  claimant  and  city  having 
lien  for  assessments  making  them  parties.  (North  Coast  R.  Co.  v. 
Hess,  56  Wash.  335,  106  Pac.  853.) 

§  464.    Notice — Contents  of  and  Service, 

[§  922,  Rera.-Bal.]  A  notice,  stating  briefly  the  objects  of 
the  petition,  and  containing  a  description  of  the  land,  real 
estate,  premises,  or  property  sought  to  be  appropriated,  and 
stating  the  time  and  place  when  and  where  the  same  will  be 
presented  to  the  court,  or  the  judge  thereof,  shall  be  served 
on  each  and  every  person  named  therein  as  owner,  encum- 
brancer, tenant,  or  otherwise  interested  therein,  at  least  ten 
days  previous  to  the  time  designated  in  such  notice  for  the 
presentation  of  such  petition.  Such  service  shall  be  made 
by  delivering  a  copy  of  such  notice  to  each  of  the  persons 
or  parties  so  named  therein,  if  a  resident  of  the  state;  or  in 
case  of  the  absence  of  such  person  or  party  from  his  or  her 


§  464  EXISTING    CORPORATION   LAWS,    1913.  318 

usual  place  of  abode,  by  leaving  a  copy  of  such  notice  at  his 
or  her  usual  place  of  abode,  or  in  case  of  a  foreign  corporation, 
at  its  principal  place  of  business  in  this  state,  with  some  person 
of  more  than  sixteen  years  of  age.  In  ease  of  domestic  cor- 
porations, such  service  shall  be  made  upon  the  president,  sec- 
retary, or  other  director  or  trustee  of  such  corporation.  In 
case  of  minors  on  their  guardians,  or  in  case  no  guardian 
shall  have  been  appointed,  then  on  the  person  who  has  the 
care  and  custody  of  such  minor.  In  case  of  idiots,  lunatics, 
or  distracted  persons,  on  their  guardian ;  or  in  case  no  guard- 
ian shall  have  been  appointed,  then  on  the  person  in  whose 
care  or  charge  they  are  found.  In  case  the  land,  real  estate, 
premises,  or  other  property  sought  to  be  appropriated  is 
state  school,  or  county  land,  the  notice  shall  be  served  on 
the  auditor  of  the  county  in  which  the  land,  real  estate, 
premises  or  other  property  sought  to  be  appropriated  is  sit- 
uated. In  all  cases  where  the  owner  or  person  claiming  an 
interest  in  such  real  or  other  property  is  a  nonresident  of 
this  state,  or  where  the  residence  of  such  owner  or  person  is 
unknown,  and  an  affidavit  of  the  agent  or  attorney  of  the 
corporation  shall  be  filed  that  such  owner  or  person  is  a  non- 
resident of  this  state,  or  that,  after  diligent  inquiry  his  resi- 
dence is  unknown,  or  cannot  be  ascertained  by  such  de- 
ponent, service  may  be  made  by  publication  thereof  in  anj' 
newspaper  published  in  the  county  where  such  lands  are 
situated,  once  a  week  for  two  successive  weeks;  and  in  case 
no  newspaper  is  published  in  said  county,  then  such  publica- 
tion may  be  had  in  a  newspaper  published  in  the  county 
nearest  to  the  county  in  which  lies  the  land  sought  to  be  ap- 
propriated. And  such  publication  shall  be  deemed  service 
upon  each  of  nonresident  person  or  persons  whose  residence 
is  unknown.  Such  notice  shall  be  signed  by  the  president, 
manager,  secretary,  or  attorney  of  the  corporation ;  and  in 
case  the  proceedings  provided  for  in  this  act  are  insti- 
tuted by  the  owner  or  any  other  person  or  party  interested 
in  the  land,  real  estate,  or  other  property  sought  to  be  appro- 
priated, then  such  notice  shall  be  signed  by  such  owner, 
person  or  party  interested,  or  his,  her,  or  its  attorney.     Such 


319      RIGHT  OF  EMINENT  DOMAIN  BY  CORPORATION.       §§  464a-466 

notice  may  be  served  by  any  competent  person  over  twenty- 
one  years  of  age.  Due  proofs  of  the  service  of  such  notice, 
by  affidavit  of  the  person  serving  the  same,  or  by  the 
printer's  affidavit  of  publication,  shall  be  filed  with  the  clerk 
of  such  superior  court  before  or  at  the  time  of  the  presenta- 
tion of  such  petition.  Want  of  service  of  such  notice  shall 
render  the  subsequent  proceedings  void  as  to  the  person  not 
served;  but  all  persons  or  parties  having  been  served  with 
notice  as  herein  provided,  either  by  publication  or  otherwise, 
shall  be  bound  by  the  subsequent  proceedings.  In  all  other 
cases  not  otherwise  provided  for,  service  of  notices,  order, 
and  other  papers  in  the  proceedings  authorized  by  this  act 
may  be  made  as  the  superior  court,  or  the  judge  thereof 
may  direct.  [Laws  1890,  §2,  p.  295;  2  H.  C,  §649;  Bal., 
§5638.] 

Notice  must  be  served  personally  or  by  publication  on  all  parties  in- 
terested. (Moynahan  v.  Superior  Court,  42  Wash.  172;  State  ex  rel. 
Trimble  v.  Superior  Court,  31  Wash.  445;  Chehalis  County  v.  Ellingson, 
21  Wash.  638;  Weed  v.  Goodwin,  36  Wash.  31;  Thomas  v.  Superior 
Court,  42  Wash.  521;  Spokane  etc.  Ry.  Co.  v.  Connelly,  48  Wash.  515; 
King  County  v.  Melker,  50  Wash.  29;  Hanson  v.  Hammer,  15  Wash.  315.) 

§  464a.     Lands  Owned  by  State. 

[§  923,  Rem.-Bal.]  In  all  condemnation  proceedings 
brought  for  the  purpose  of  appropriating  any  land  owned 
by  the  state  or  in  which  it  has  an  interest,  service  of  process 
shall  be  made  upon  the  commissioner  of  public  lands.  [Laws 
1907,  p.  507,  §  1.] 

§  465.     Adjournment  of  Proceedings. 

[§  924,  Rem.-Bal.]  The  court  or  judge  may,  upon  the  ap- 
plication of  the  petitioner  or  of  any  owner  or  party  inter- 
ested, for  reasonable  cause,  adjourn  the  proceedings  from 
time  to  time,  and  may  order  new  or  further  notice  to  be 
given  to  any  party  whose  interest  may  be  affected.  [Laws 
1890,  §  3,  p.  297 ;  2  H.  C,  §  650 ;  Bal.,  §  5639.] 

§  466.    Jury  shall  be  Summoned. 

[§925,  Rem.-Bal.]  At  the  time  and  place  appointed  for 
hearing  said  petition,  or  to  which  the  same  may  have  been 


§  466  EXISTING    CORPORATION   LAWS,    1913.  320 

adjourned,  if  the  court,  or  judge  thereof,  shall  have  satisfac- 
tory proof  that  all  parties  interested  in  the  land,  real  estate, 
premises,  or  other  property  described  in  said  petition  have 
been  duly  served  with  said  notice  as  above  prescribed,  and 
shall  be  further  satisfied,, by  competent  proof,  that  the  con- 
templated use  for  which  the  land,  real  estate,  premises,  or 
other  property  sought  to  be  appropriated  is  really  a  public 
use,  or  is  for  a  private  use  for  a  private  way  of  necessity, 
and  that  the  public  interest  requires  the  prosecution  of 
such  enterprise,  or  the  private  use  is  for  a  private  way 
of  necessity,  and  that  the  land,  real  estate,  premises,  or 
other  property  sought  to  be  appropriated  are  required  and 
necessary  for  the  purposes  of  such  enterprise,  the  court,  or 
judge  thereof,  may  make  an  order,  to  be  recorded  in  the 
minutes  of  said  court,  directing  the  sheriff  to  summon  from 
the  citizens  of  the  county  in  which  any  lands,  real  estate, 
premises,  or  other  property  sought  to  be  appropriated  shall 
be  situated  as  many  qualified  persons  as  may  be  necessary 
in  order  to  form  a  jury  of  twelve  persons,  unless  the  parties 
to  the  proceedings  consent  to  a  less  number  (such  number 
to  be  not  less  than  three),  and  such  consent  shall  be  entered 
by  the  clerk  in  the  minutes  of  the  trial.  If  necessary  to  com- 
plete the  jury,  the  sheriff,  under  direction  of  the  court,  or 
judge  thereof,  shall  summon  as  many  qualified  persons  as 
may  be  required  to  complete  the  jury  from  the  bystanders, 
citizens  of  the  county  where  the  land,  real  estate,  premises, 
or  other  property  is  situated.  [Laws  1897,  §  1,  p.  63 ;  2  H.  C, 
§651;  Bal.,  §5640.] 

Assessment  of  damages  by  commissioners,  unconstitutional;  ques- 
tion of  damages  must  be  submitted  to  jury.  (Peterson  v.  Smith,  6 
Wash.  163,  82  Pac.  1050;  In  re  Smith's  Petition,  9  Wash,  85,  37  Pac. 
311,  494;  Seanor  v.  County  Commrs.,  13  Wash.  48,  42  Pae,  552; 
Snohomish  County  v.  Hayward,  11  Wash.  429,  39  Pac.  652.) 

It  is  for  the  court  to  determine  whether  there  is  proof  that  the 
land  sought  to  be  condemned  is  required  and  necessary.  (State  ex 
rel.  Postal  Tel.  etc.  Co.  v.  Superior  Court,  64  Wash.  189,  116  Pac.  855.) 

The  selection  by  the  condemner  makes  prima  facie  case  of  neces- 
sity. (State  ex  rel.  Sylvester  v.  Superior  Court,  64  Wash.  594,  117 
Pae.  487.) 


321  RIGHT  OF  EMINENT  DOMAIN  BY  CORPORATION.  §  467 

Question  of  public  use  is  for  the  court  and  its  adjuflication  is  con- 
clusive. (Peterson  v.  Smith,  6  Wash.  163;  Healy  Lumber  Co.  v.  Morris, 
33  V.'ash.  490;  Sulton  W.  &  P.  Co.  v.  Weyerhauser  etc.  Co.,  31  Wash. 
558.) 

Property  cannot  be  taken  for  private  use.  (Harris  v.  Superior  Court, 
42  Wash.   660.) 

And  necessity  of  the  taking  for  public  us€  must  be  shown.  (State 
ex  rel.  Ami  Co.  v.  Superior  Court,  42  Wash.  675.) 

But  it  is  the  character  and  not  the  extent  of  the  use  that  governs. 
(State  ex  rel.  Ami  Co.  v.  Superior  Court,  42  Wash.  675;  Lewis  County 
V.  Gordon,  20  Wash.  80.) 

As  to  latter  part  in  regard  to  summoning  of  jury,  see  Laws  1905,  p. 
270,  repealing  same;  O.  E.  &  N.  Co.  v.  McCormick,  46  Wash.  45. 

§  467.     Trial — Assessment  of  Damages — Judgment. 

[§  926,  Rem.-Bal.]  A  judge  of  the  superior  court  shall 
preside  at  the  trial,  which  shall  be  held  at  such  time  as  the 
court,  or  judge  thereof,  may  direct,  at  the  courthouse  in  the 
county  where  the  land,  real  estate,  premises,  or  other  prop- 
erty sought  to  be  appropriated  is  situated,  and  the  jurors  at 
such  trial  shall  make  in  each  case  a  separate  assessment  of 
damages  which  shall  result  to  any  person,  corporation  or 
company,  or  to  the  state,  or  to  any  county,  by  reason  of  the 
appropriation  and  use  of  such  land,  real  estate^  premises  or 
other  property  by  such  corporation  as  aforesaid  for  any  and 
all  corporate  purposes,  and  shall  ascertain,  determine,  and 
award  the  amount  of  damages  to  be  paid  to  said  owner  or 
owners  respectively,  and  to  all  tenants,  encumbrancers,  and 
others  interested,  for  the  taking  or  injuriously  affecting 
such  land,  real  estate,  premises,  or  other  property,  for  the 
purpose  of  such  enterprise,  irrespective  of  any  benefit  from 
any  improvement  proposed  by  such  corporation.  Upon  the 
trial,  witnesses  may  be  examined  in  behalf  of  either  party 
to  the  proceedings,  as  in  civil  actions;  and  a  witness  served 
with  a  subpoena  in  such  proceeding  shall  be  punished  for 
failure  to  appear  at  such  trial,  or  for  perjury,  as  upon  a  trial 
of  a  civil  action.  Upon  the  verdict  of  the  jury,  judgment 
shall  be  entered  for  the  amount  of  the  damages  awarded  to 
such  owner  or  owners  respectively,  and  to  all  tenants,  en- 
cumbrancers, and  others  interested,  for  the  taking  or  in- 
21 


§  468  EXISTING    CORPORATION   LAWS,    1913.  322 

juriously  affecting  such  land,  real  estate,  premises,  or  other 
property.  In  case  a  jury  is  waived  as  in  civil  cases  in  courts 
of  record  in  the  manner  prescribed  by  law,  the  compensation 
to  be  paid  for  the  property  sought  to  be  appropriated  shall 
be  ascertained  and  determined  by  the  court,  or  the  judge 
thereof,  and  the  proceedings  shall  be  the  same  as  in  trials  of 
an  issue  of  fact  by  the  court.  [Laws  1890,  §  5,  p.  297;  2 
H.  C,  §652;Bal.,  5641.] 

Property  cannot  be  taken  until  payment  is  made  (Puyallup  v.  Lacey, 
43  Wash.  110),  and  the  measure  of  damages  is  the  value  of  the  land 
taken  and  the  depreciation  of  land  not  taken  (Seattle  etc.  Co.  v. 
Eoeder,  30  Wash.  244),  without  allowance  for  benefits.  (Enoch  v. 
Railway  Co.,  6  Wash.  393.) 

Except  that  benefits  may  be  allowed  municipality.  (Lincoln  County 
V.  Brock,  37  Wash.  14;  Jones  v.  Seattle,  23  Wash.  753.) 

No  formal  pleadings  or  issues  are  required  by  the  statute.  (Railway 
Co.  V.  Murphine,  4  Wasi.  448.) 

The  value  of  land  is  not  determined  by  the  unwillingness  of  owner  to 
sell  or  by  price  which  adjacent  owners  ask,  but  by  the  uses  to  which  it 
may  be  put  and  the  value  thereof.  (Port  Townsend  R.  Co.  v.  Barbare, 
46  Wash.  275;  Chicago  etc.  R.  Co.  v.  Alexander,  47  Wash.  131;  Seattle 
etc.  R.  Co.  v.  Roeder,  30  Wash.  244.) 

Petitioner  has  burden  of  proof  and  privilege  to  open  and  close  on 
question  of  damages.     (Bellingham  etc.  Ry.  Co.  v.  Strand,  4  Wash.  311.) 

It  is  discretionary  with  the  court  to  allow  the  jury  to  view  the  premises. 
(Seattle  etc.  R.  Co.  v.  Roeder,  30  Wash.  244.) 

§  468.    Judgment  and  Decree  of  Appropriation. 

[§  927,  Rem.-Bal.]  At  the  time  of  rendering  judgment  for 
damages,  whether  upon  default  or  trial,  if  the  damages 
awarded  be  then  paid,  or  upon  their  payment,  if  not  paid  at 
the  time  of  rendering  such  judgment,  the  court,  or  judge 
thereof,  shall  also  enter  a  judgment  or  decree  of  appropriation 
of  the  land,  real  estate,  premises,  right  of  way,  or  other  prop- 
erty sought  to  be  appropriated,  thereby  vesting  the  legal  title 
to  the  same  in  the  corporation  seeking  to  appropriate  such 
land,  real  estate,  premises,  right  of  way,  or  other  property  for 
corporate  purposes.  Whenever  said  judgment  or  decree  of 
appropriation  shall  affect  lands,  real  estate,  or  other  premises, 
a  certified  copy  of  such  judgment  or  decree  of  appropriation 
may  be  filed  for  record  in  the  office  of  the  auditor  of  the  county 


323  RIGHT  OF  EMINENT  DOMAIN  BY  CORPORATION.         §  468a 

where  the  said  land,  real  estate,  or  other  premises  are  situated, 
and  shall  be  recorded  by  said  auditor  like  a  deed  of  real  estate, 
and  with  like  effect.  If  the  title  to  said  land,  real  estate, 
premises,  or  other  property  attempted  to  be  acquired  is  found 
to  be  defective  from  any  cause,  the  corporation  may  again 
institute  proceedings  to  acquire  the  same,  as  in  this  chapter 
provided.  [Laws  1891,  §1,  p.  84;  2  H.  C,  §653;  Bal.,  § 
5642.] 

Qualified  title  only,  i.  e.,  so  far  as  is  necessary  for  the  public  nse,  is 
vested  in  the  condemner.  (Neitzel  v.  Spokane  Int.  R.  Co.,  65  Wash. 
100,  117  Pac.  864.) 

Judgment  and  adjudication  not  binding  on  owner  not  made  party 
(Owen  V.  St.  Paul  etc.  Ry.  Co.,  12  Wash.  314);  but  the  judgment  is  con- 
clusive on  parties  in  interest  served  (Compton  v.  Seattle,  38  Wash.  514) ; 
unless  it  be  irregular  on  its  face,  when  it  will  be  set  aside  (Seattle  etc. 
Ry.  Co.  V.  Johnson,  7  Wash.  97). 

Title  acquired  is  not  absolute  but  to  the  extent  required  for  the  public 
use.  (Kakeldy  v.  Columbia  etc.  R.  Co.,  37  Wash.  675;  Nicomen  Boom 
Co.  V.  North  Shore  etc.  Co.,  40  Wash.  315.) 

Where  property  taken  for  public  use  is  subject  to  mortgage,  the  mort- 
gage attaches  to  the  damages  awarded.  (National  Bank  of  Seattle  v. 
Johnson,  16  Wash.  536.) 

§  468a.    Filing  Decree  in  Case  of  Lands  Owned  by  State. 

[§  928,  Rem.-Bal.]  "When  a  decree  is  entered  appropriat- 
ing lands  owned  by  the  state,  or  in  which  the  state  has  an 
interest,  before  any  such  decree  shall  be  effective,  the  plain- 
tiff shall  cause  to  be  filed  in  the  office  of  the  Commissioner 
of  Public  Lands  a  certified  copy  of  such  decree,  together 
with  a  plat  of  the  lands  appropriated  and  contiguous  thereto, 
in  form  and  substance  as  prescribed  and  required  by  the 
Board  of  State  Land  Commissioners,  showing  in  detail  the 
lands  appropriated,  together  with  the  amount  of  damages 
fixed  and  awarded  in  the  decree.  Upon  receipt  of  such  de- 
cree, plat  and  damages,  the  Commissioner  of  Public  Lands 
shall  examine  the  same,  and  if  he  shall  find  that  the  final 
decree  and  proceedings  comply  with  the  original  petition 
and  notice  and  any  amendment  duly  authorized,  and  that 
no  additional  interest  of  the  state  has  been  taken  or  ap- 
propriated through  error  or  mistake,  he  shall  cause  nota- 


§  469  EXISTING    CORPORATION   LAWS,    1913.  324 

tions  thereof  to  be  made  upon  the  abstracts,  records  and 
tract  books  of  his  office,  and  shall  issue  to  the  plaintiff  his 
certificate,  reciting  compliance,  in  substance,  with  the  re- 
quirements of  this  act,  particularly  describing  the  lands  ap- 
propriated, and  thereupon  the  appropriation  shall  become 
effective  and  the  Commissioner  of  Public  Lands  shall  forth- 
with transmit  the  amount  received  as  damages  to  the  State 
Treasurer,  as  in  the  case  of  the  sale  of  land,  and  the  sub- 
division of  land  through  which  such  right  of  way  is  appro- 
priated shall  thereafter  be  sold  or  leased  subject  to  the  right 
of  way.     [Laws  1909,  p.  625,  §  1.] 

§  469.     Damages  may  be  Paid  into  Court. 

[§  929,  Rem.-Bal.]  Upon  the  entry  of  judgment  upon  the 
verdict  of  the  jury,  or  the  decision  of  the  court,  or  judge 
thereof,  awarding  damages,  as  hereinbefore  prescribed,  the  pe- 
titioner, or  any  officer  of  or  other  person  duly  appointed  by 
said  corporation,  may  make  payment  of  the  damages  assessed 
to  the  parties  entitled  to  the  same,  and  of  the  costs  of  the  pro- 
ceedings, by  depositing  the  same  with  the  clerk  of  said  superior 
court,  to  be  paid  out  under  the  direction  of  the  court,  or  judge 
thereof ;  and  upon  making  such  payment  into  the  court  of  the 
damages  assessed  and  allowed,  and  of  the  costs  to  any  land, 
real  estate,  premises,  or  other  property  mentioned  in  said 
petition,  such  corporation  shall  be  released  and  discharged 
from  any  and  all  further  liability  therefor,  unless  upon  appeal 
the  owner,  or  other  person  or  party  interested,  shall  recover 
a  greater  amount  of  damages;  and  in  that  case,  only  for  the 
amount  in  excess  of  the  sum  paid  into  said  court,  and  the  costs 
of  appeal :  Provided,  that  in  case  of  an  appeal  to  the  supreme 
court  of  the  state  by  any  party  to  the  proceedings,  the  money 
so  paid  into  the  superior  court  by  such  corporation  as  afore> 
said  shall  remain  in  the  custody  of  said  court  until  the  final 
determination  of  the  proceedings  by  the  said  supreme  court. 
[Laws  1890,  §  7,  p.  299;  2  H.  C,  §  654;  Bal,  §  5643.] 

Sufifieient  for  the  condemner  to  pay  the  amount  awarded  into  court 
for  the  party  entitled.  (Silverstone  v.  Ham,  66  Wash.  440,  120  Pac. 
109.) 


325      RIGHT  OF  EMINENT  DOMAIN  BY  CORPORATION.       §§  470,  471 

§  470.    Disposition  of  Money — Conflicting  Claims. 

[§  930,  Rem.-Bal.]  Any  person,  corporation,  state  or 
county,  claiming:  to  be  entitled  to  any  money  paid  into  court, 
as  provided  in  this  chapter  may  apply  to  the  court  therefor, 
and  upon  furnishing  evidence  satisfactory  to  the  court  that 
he  or  it  is  entitled  to  the  same,  the  court  shall  make  an  order 
directing  the  payment  to  such  claimant  the  portion  of  such 
money  as  he  or  it  shall  be  found  entitled  to ;  but  if,  upon  ap- 
plication, the  court,  or  judge  thereof,  shall  decide  that  the 
title  to  the  land,  real  estate,  premises,  or  other  property  speci- 
fied in  the  application  of  such  claimant,  was  in  such  condition 
as  to  require  that  an  action  be  commenced  to  determine  the 
conflicting  claims  thereto,  he  shall  refuse  such  order  until 
such  action  is  commenced,  and  the  conflicting  claims  to  such 
land,  real  estate,  premises,  or  other  property  be  determined 
according  to  law.  [Laws  1890,  §  8,  p.  299;  2  H.  C,  §  655; 
Bal,  §5644.] 

§  471.    Appeal. 

[§  931,  Rem.-Bal.]  Either  party  may  appeal  from  the 
judgment  for  damages  entered  in  the  superior  court  to  the 
supreme  court  of  the  state  within  thirty  days  after  the  entry 
of  judgment  as  aforesaid,  and  such  appeal  shall  bring  before 
the  supreme  court  the  propriety  and  justness  of  the  amount 
of  damages  in  respect  to  the  parties  to  the  appeal :  Provided, 
however,  that  no  bond  shall  be  required  of  any  person  in- 
terested in  the  property  sought  to  be  appropriated  by  such 
corporation,  but  in  case  the  corporation  appropriating  such 
land,  real  estate,  premises  or  other  property  is  appellant,  it 
shall  give  a  bond  like  that  prescribed  in  the  next  following  sec- 
tion, to  be  executed,  filed,  and  approved  in  the  same  manner: 
And  provided  further,  that  if  the  owner  of  the  land,  real 
estate,  premises,  or  other  property,  accepts  the  sum  awarded 
by  the  jury,  the  court,  or  the  judge  thereof,  he  shall  be 
tleemed  thereby  to  have  waived  conclusively  an  appeal  to  the 
supreme  court,  and  final  judgment  by  default  may  be  ren- 
dered in  the  superior  court  as  in  other  cases.  [Laws  1890, 
§9,  p.  300;  Bal.,  §5645.] 


§§472,473    EXISTING  corporation  laws,  1913.  Ji26 

No  appeal  lies  except  as  to  justness  and  propriety  of  damages 
awarded.     (Olympia  L.  &  P.  Co.  v.  Tumwater  etc.  Co.,  55  Wash.  392, 

104  Pac.  778.) 

Writ  of  review  must  be  prosecuted  within  thirty  days  from  entry  of 
judgment.      (State  ex  rel.  Tumwater  Co.  v.  Superior  Court,  56  "Wash.  287, 

105  Pac.  815.) 

No  appeal  lies  from  order  refusing  to  vacate  adjudication  for  public 
use,     (North  Coast  R.  Co.  v.  Gentry,  58  Wash.  80,  107  Pac.  1059.) 

Verdict  of  jury  cannot  be  disturbed  if  there  is  evidence  to  sustain  it. 
(Chicago,  Milwaukee  etc.  R.  Co.  v.  Thayer,  €5  Wash.  402,  118  Pac.  318.) 

§  472.    Appeal  shall  not  Delay  Work. 

[§  932,  Rem.-Bal.]  The  constniction  of  any  railway  sur- 
face tramway,  elevated  cable  tramway  or  canal,  or  the  prose- 
cution of  any  works  or  improvements,  by  any  corporation 
as  aforesaid,  shall  not  be  hindered,  delayed  or  prevented 
by  the  prosecution  of  the  appeal  of  any  party  to  the  pro- 
ceedings: Provided,  the  corporation  aforesaid  shall  execute 
and  file  with  the  clerk  of  the  court  in  which  the  appeal  is 
pending  a  bond,  to  be  approved  by  said  clerk,  with  sufficient 
sureties,  conditioned  that  the  persons  executing  the  same  shall 
pay  whatever  amount  may  be  required  by  the  judgment  of  the 
court  therein,  and  abide  any  rule  or  order  of  the  court  in  rela- 
tion to  the  matter  in  controversy.  [Laws  1897,  §2,  p.  64; 
2H.C.,  §657;  Bal.,  §5646.] 

Appeal  must  be  taken  within  thirty  days.  (Seattle  etc.  Ey.  Co.  ▼. 
O'Meara,  4  Wash.  17.) 

General  statute  regulating  appeals  is  not  applicable  (Western  etc.  Co. 
V.  St.  Ann.  Co.,  22  Wash.  158)  ;  appeal  bond  by  corporation  appellant 
necessary  (Port  Angeles  etc.  E.  Co.  v.  Cooke,  38  Wash.  184). 

Special  statute  re  appeals  exclusive.     (Tacoma  v.  Co.,  50  Wash,  683.) 

§  473.    Appropriation  of  Right  of  Way  Through  Defiles,  etc. 

[§  933,  Rem.-Bal.]  Any  railroad  company  whose  right  of 
way  passes  through  any  canyon,  pass,  or  defile  shall  not  pre- 
vent any  other  railroad  company  from  the  use  and  occupancy 
of  said  canyon,  pass,  or  defile  for  the  purpose  of  its  road  in 
common  with  the  road  first  located  or  the  crossing  of  other 
railroads  at  grade,  and  any  railroad  company,  authorized  by 
law  to  appropriate  land,  real  estate,  premises,  or  other  prop- 


327  RIGHT  OP  EMINENT  DOMAIN  BY  CORPORATION.         §  473a 

erty  for  right  of  way,  or  any  other  corporate  purposes  may 
present  a  petition  in  the  manner  and  form  hereinbefore  pro- 
vided for  the  appropriation  of  a  right  of  way  through  any 
canyon,  pass  or  defile  for  the  purpose  of  its  road,  where  right 
of  way  has  already  been  located,  condemned  or  occupied  by 
some  other  railroad  company  through  such  canyon,  pass,  or 
defile  for  the  purpose  of  its  road,  and  thereupon  like  proceed- 
ings shall  be  had  upon  such  petition  as  herein  provided  in 
other  cases;  and  at  the  time  of  rendering  judgment  for 
damages,  whether  upon  default  or  trial,  the  court,  or  judge 
thereof,  shall  enter  a  judgment  or  decree  authorizing  said 
railroad  company  to  occupy  and  use  said  right  of  way,  road- 
bed, and  tract,  if  necessary,  in  common  with  the  railroad  com- 
pany or  companies  already  occupying  or  owning  the  same,  and 
defining  the  terms  and  conditions  upon  which  the  same  shall  be 
so  occupied  and  used  in  common.  [Laws  1890,  §  12,  p.  301; 
2H.  C,  §658;Bal.,  §5647.] 

Section  construed.  (Seattle  etc.  Co.  v.  State,  7  Wash.  150,  164; 
North.  Coast  R.  Co.  v.  North.  Pac.  E.  Co.,  48  Wash.  529.) 

§  473a.    Ways  of  Necessity. 

An  owner,  or  one  entitled  to  the  beneficial  use,  of  land 
which  is  so  situate  with  respect  to  the  land  of  another  that 
it  is  necessary  for  its  proper  use  and  enjoyment  to  have  and 
maintain  a  private  way  of  necessity  or  to  construct  and 
maintain  any  drain,  flume  or  ditch,  on,  across,  over  or 
through  the  land  of  such  other,  for  agricultural,  domestic 
or  sanitary  purposes,  may  condemn  and  may  condemn  and 
take  lands  of  such  other  sufficient  in  area  for  the  construc- 
tion and  maintenance  of  such  private  way  of  necessity,  or 
for  the  construction  and  maintenance  of  such  drain,  flume 
or  ditch,  as  the  case  may  be.  The  term  "private  way  of 
necessity,"  as  used  in  this  act,  shall  mean  and  include  a 
right  of  way  on,  across,  over  or  through  the  land  of  another 
for  means  of  ingress  and  egress,  and  the  construction  and 
maintenance  thereon  of  roads,  logging  roads,  flumes,  canals, 
ditches,  tunnels,  tramways  and  other  structures  upon,  over 
and  through  which  timber,  stone,  minerals  or  other  valuable 


§§  473b,  473c     existing   corporation   laws,   1913.  323 

materials   and   products  may   be   transported   and   carried. 
[Laws  1913,  c.  133,  §  1.] 

§  473b.     Condemnation  of  Ways  of  Necessity. 

The  procedure  for  the  condemnation  of  land  for  a  private 
way  of  necessity  or  for  drains,  flumes  or  ditches  under  the 
provisions  of  this  act  shall  be  the  same  as  that  provided  for 
the  condemnation  of  private  property  by  railroad  companies, 
but  no  private  property  shall  be  takem  or  damaged  until  the 
compensation  to  be  made  therefor  shall  have  been  ascer- 
tained and  paid  as  provided  in  the  case  of  condemnation  by 
railroad  companies.     [Laws  1913,  c.  133,  §  2.] 

§  473c.    Duty  as  Common  Carriers. 

That  any  person  or  corporation  availing  themselves  of  the 
provisions  of  this  act  for  the  purpose  of  acquiring  a  right 
of  way  for  a  logging  road,  as  a  condition  precedent,  con- 
tract and  agree  to  carry  and  eonvey  over  such  roads  to  either 
termini  thereof  any  of  the  timber  or  other  produce  of  the 
lands  through  which  such  right  is  acquired  at  any  and  all 
times,  so  long  as  said  road  is  maintained  and  operated,  and 
at  reasonable  prices ;  and  a  failure  so  to  do  shall  terminate 
such  right  of  way.  The  reasonableness  of  the  rate  shall  be 
subject  to  determination  by  the  public  service  commission. 
[Laws  1913,  c.  133,  §  3.] 


329  APPROPRIATION    OF   LANDS  AND    HIGHWAYS.       §§474,475 


APPROPRIATION  OF  LANDS  AND  HIGH- 
WAYS FOR  CORPORATE  PUR- 
POSES. 

§  474.    Right  to  Enter  Lands  for  Survey,  etc. 

f§  8739,  Rem.-Bal.]  A  corporation  organized  for  the  con- 
struction of  any  railway,  macadamized  road,  plank  road,  clay 
road,  canal  or  bridge,  shall  have  a  right  to  enter  upon  any  land, 
real  estate  or  premises,  or  any  of  the  lands  granted  to  the 
state  of  Washington  for  school,  university  or  other  purposes, 
between  the  termini  thereof,  for  the  purpose  of  examining, 
locating  and  surveying  the  line  of  such  road  or  canal,  or  the 
site  of  such  bridge,  doing  no  unnecessary  damage  thereby. 
[Laws  1895,  §  1,  p.  146 ;  Cd.  1881,  §  2455  j  1  H.  C,  §  1569  ;  Bal., 
§4333.] 

Condemnation  of  land  held  in  trust  for  the  public  as  a  city  street 
not  authorized.  (State  ex  rel.  Schade  Co.  v.  Superior  Court,  62  Wash. 
96,  113  Pac.  576.) 

A  railroad  company  having  changed  its  location  may  condemn  land. 
(State  ex  rel.  Sylvester  v.  Superior  Court,  64  Wash.  594,  117  Pac.  487. 
See  E€m.  &  Bal.  Code,  sec.  8738.) 

Tide  lands  could  not  be  condemned  until  authorized  by  statute.  (See 
next  section;  Seattle  &  M.  Ry.  v.  State,  7  Wash.  150.) 

§  475.    Extent  of  Right  of  Appropriation. 

[§8740,  Rem.-Bal.]  Every  corporation  organized  for  the 
construction  of  any  railway,  macadamized  road,  plank  road, 
clay  road,  canal  or  bridge,  is  hereby  authorized  and  em- 
powered to  appropriate,  by  condemnation,  land  and  any  in- 
terest in  land  or  contract  right  relating  thereto,  including  any 
leasehold  interest  therein  and  any  rights  of  way  for  tunnels 
beneath  the  surface  of  the  land,  and  any  elevated  rights  of  Avay 
above  the  surface  thereof,  including  lands  granted  to  the  state 
for  university,  school  or  other  purposes,  and  also  tide  and 
shore  lands  belonging  to  the  state  (but  not  including  harbor 
areas),  which  may  be  necessary  for  the  line  of  such  road,  rail- 
way or  canal,  or  site  of  such  bridge,  not  exceeding  two  hun- 


§  475  EXISTING  CORPORATION  LAWS,  1913.  330 

dred  feet  in  width,  besides  a  sufficient  quantity  thereof  for 
toll-houses,  workshops,  materials  for  construction,  excavations 
and  embankments  and  a  right  of  way  over  adjacent  lands  or 
property,  to  enable  such  corporation  to  construct  and  prepare 
its  road,  railway,  canal  or  bridge,  and  to  make  proper  drains; 
and  in  case  of  a  canal,  whenever  the  court  shall  deem  it  neces- 
sary, to  appropriate  a  sufficient  quantity  of  land,  including 
lands  granted  to  the  state  for  university,  school  or  other  pur- 
poses, in  addition  to  that  before  specified  in  this  section,  for 
the  construction  and  excavation  of  such  canal  and  of  the  slopes 
and  bermes  thereof,  not  exceeding  one  thousand  feet  in  total 
width;  and  in  case  of  a  railway  to  appropriate  a  sufficient 
quantity  of  any  such  land,  including  lands  granted  to  the 
state  for  university,  schools  and  other  purposes  and  also  tide 
and  shore  lands  belonging  to  the  state  (but  not  including  har- 
bor areas) ,  in  addition  to  that  before  specified  in  this  section, 
for  the  necessary  sidetracks,  depots  and  water  stations,  and  the 
right  to  conduct  water  thereto  by  aqueduct,  and  for  yards, 
terminal,  transfer  and  switching  grounds,  docks  and  ware- 
houses required  for  receiving,  delivering,  storage  and  handling 
of  freight,  and  such  land,  or  any  interest  therein,  as  may  be 
necessary  for  the  security  and  safety  of  the  public  in  the  con- 
struction, maintenance  and  operation  of  its  railways ;  compen- 
sation therefor  to  be  made  to  the  owner  thereof  irrespective  of 
any  benefit  from  any  improvement  proposed  by  such  corpora- 
tion, in  the  manner  provided  by  law:  And  provided  further, 
that  if  such  corporation  locate  the  bed  of  such  railway  or 
canal  upon  any  part  of  the  track  now  occupied  by  any  estab- 
lished state  or  county  road,  said  corporation  shall  be  respon- 
sible to  the  county  commissioners  of  said  county  or  counties 
in  which  such  state  or  county  road  so  appropriated  is  located, 
for  all  expenses  incurred  by  such  county  or  counties  in  re- 
locating and  opening  the  part  of  such  road  so  appropriated. 
The  term  land  as  herein  used  includes  tide  and  shore  lands 
but  not  harbor  areas;  it  also  includes  any  interest  in  land  or 
contract  right  relating  thereto,  including  any  leasehold  in- 
terest therein.  [Laws  1907,  §  1,  p.  674  j  Cd.  1881,  §  2456;  1 
H.  C,  §1570;  Bal.,  §4334.] 


331  APPROPRIATION  OP  LANDS   AND   HIGHWAYS.  §  476 

Railroad  constructing  its  road  will  be  protected  from  appropriation  of 
its  terminals.  (State  ex  rel.  Spokane  Falls  &  N.  R.  Co.  v.  Superior 
Court,  40  Wash.  389,  82  Pac.  417.) 

Right  of  way  for  railroad  is  public  use.  (State  ex  rel.  Smith  v. 
Superior  Court,  30  Wash.  219,  70  Pac.  484;  State  ex  rel.  Trimble  v. 
Superior  Court,  31  Wash.  445,  72  Pac.  89;  State  ex  rel.  Harlan  v. 
Centralia  Co.,  42  Wash.  632,  85  Pac.  344.) 

No  constitutional  or  statutory  prohibition  to  crossing  abutting  harbor 
area.  (State  ex  rel.  Hulme  v.  Gray's  Harbor  etc.  Co.,  54  Wash.  530,  103 
Pac.  809.) 

This  section  does  not  permit  railways  to  condemn  public  avenues. 
(State  ex  rel.  Schade  etc.  Co.  v.  Superior  Court,  62  Wash.  96,  113  Pac. 
576.) 

A  railroad  company  having  changed  its  location  may  condemn  land. 
(State  ex  rel.  Sylvester  v.  Superior  Court,  64  Wash.  594,  117  Pac.  487.) 

Attempt  to  agree  with  owner  not  condition  precedent  to  condemnation. 
(State  ex  rel.  Boom  Co.  v.  Superior  Court,  47  Wash.  166.) 

Railroad  right  of  way  across  public  land  is  subject  to  settler's  rights, 
which  must  be  condemned  if  appropriated.  (Slaght  v.  Northern  Pac. 
R.  Co.,  39  Wash.  576.) 

Railway  company  by  constructing  its  road  over  unsurveyed  public  land 
by  such  definite  location  gets  title  as  against  subsequent  locator  of  min- 
ing claim.     (Penn.  Min.  etc.  Co,  v.  Everette  etc.  R.  Co.,  29  Wash.  102.) 

§  476.    Right  to  Cross  Other  Roads,  etc. 

[§  8736,  Rem.-Bal.]  Every  corporation  formed  under  this 
chapter  for  the  construction  of  a  railroad  shall  have  the  power 
to  cross,  intersect,  join  and  unite  its  railway  with  any  other 
railway  before  constructed,  at  any  point  in  its  route,  and  upon 
the  grounds  of  such  other  railway  company,  with  the  necessary 
turnouts,  sidings,  switches  and  other  conveniences  in  further- 
ance of  the  objects  of  its  connections,  and  every  corporation 
whose  railway  is  or  shall  be  hereafter  intersected  by  any  new 
railway  shall  unite  with  the  corporation  owning  such  new  rail- 
way in  forming  such  intersections  and  connections  and  grant 
the  facilities  aforesaid;  and  if  the  two  corporations  cannot 
agree  upon  the  amount  of  compensation  to  be  made  therefor, 
or  the  points  and  manner  of  such  crossing  and  connections,  the 
same  shall  be  ascertained  and  determined  in  the  manner  pro- 
vided by  law  for  the  taking  of  lands  and  other  property  which 
shall  be  necessary  for  the  construction  of  its  road,  and  every 
corporation  formed  under  this  chapter  for  the  construction  of 


S  477  EXISTING  CORPORATION   LAWS,   1913.  332 

a  canal  shall  have  the  power  to  cross  and  intersect  any  railway- 
before  constructed  at  any  point  in  its  road  and  upon  the 
grounds  of  such  other  railway  company,  and  every  corpora- 
tion whose  railway  is  or  shall  hereafter  be  crossed  or  inter- 
sected by  any  canal  shall  unite  with  the  corporation  owning 
such  canal  in  forming  such  crossings  and  intersections  and 
grant  the  facilities  therefor ;  and  if  the  two  corporations  can- 
not agree  upon  the  compensation  to  be  made  therefor,  or  the 
points  and  manner  of  such  crossings  and  connections,  the  same 
shall  be  ascertained  and  determined  in  the  manner  provided 
by  law  for  the  taking  of  lands  and  other  property  which  shall 
be  necessary  for  the  construction  of  said  canal.  [Laws  1895, 
§  3,  p.  148;  Cd.  1881,  §  24561/2;  1  H.  C,  §  1571 ;  Bal.,  §  4335.) 

One  public  or  quasi-public  corporation  may  condemn  property  of  an- 
other not  interfering  with  the  public  use  by  the  latter  company;  e.  g., 
railroad  crossings  and  connections.  (Seattle  &  M.  R.  Co.  v.  Bellingham 
Bay  &  R.  Co.,  29  Wash.  491,  69  Pac.  1107;  Samish  River  Boom  Co.  v. 
Union  Boom  Co.,  32  Wash.  586,  73  Pac.  670;  Seattle  &  M.  R.  Co.  v. 
State,  7  Wash.  150,  34  Pac.  551;  State  ex  rel.  Spokane  Falls  &  N.  E, 
Co.  V.  Superior  Court,  40  Wash.  389,  82  Pac.  417.) 

Question  of  necessity  of  crossing  a  judicial  one  for  the  court.  (State 
ex  rel.  Postal  Tel.  etc.  Co.  v.  Superior  Court,  64  Wash.  189,  116  Pac. 
855.) 

In  condemnation  of  crossing  of  existing  railroad,  installing  necessary 
interlocking  device  proper  element  in  compensation,  but  future  tracks  not 
so.     (State  ex  rel.  North.  Coast  R.  Co.  v.  R.  Co.,  49  Wash.  78.) 

Railroad  company  may  condemn  crossing  over  existing  railroad  where 
necessary  only,  but  must  interfere  as  little  as  possible  with  prior  use. 
(State  ex  rel.  Kent  Lumber  Co.  v.  Superior  Court,  46  Wash.  516;  State 
ex  rel.  Portland  etc.  Co.  v.  Superior  Court,  45  Wash.  270 ;  Seattle  &  M. 
Ry.  Co.  V.  State,  7  Wash.  150.) 

§  477.     Construction  Over  Rivers,  etc.— Conditions. 

[§  8737,  Rem.-Bal.]  Every  corporation  formed  under  the 
laws  of  this  state  for  the  construction  of  railroads  or  canals 
shall  possess  the  power  to  construct  its  railway  or  canal,  as  the 
case  may  be,  across,  along  or  upon  any  river,  stream  of  water, 
watercourses,  plank  road,  turnpike  or  canal,  which  the  route 
of  such  railway  or  canal  shall  intersect  or  touch ;  but  such  cor- 
poration shall  restore  the  river,  stream,  watercourse,  plank 
road  or  turnpike  thus  intersected  or  touched  to  its  former  state 


333         APPROPRIATION   OF  LANDS   AND    HIGHWAYS.       §  §  477a,  478 

as  near  as  may  be.  and  pay  any  damages  caused  by  such  con- 
struction:  Provided,  that  the  construction  of  any  railway  or 
canal  by  such  corporation  along,  across  or  upon  any  of  the 
navigable  rivers  or  waters  of  this  state  shall  be  in  such  manner 
as  to  not  interfere  with,  impede  or  obstruct  the  navigation 
thereof;  and  all  rights,  privileges  and  powers  of  every  de- 
scription by  law  conferred  upon  road  or  railroad  companies 
are  hereby  given  and  granted  to  canal  companies  so  far  as  the 
same  may  be  applicable,  and  all  power  and  authority  possessed 
by  the  public  or  municipal  corporations  of  the  state  or  their 
local  authorities,  with  reference  to  road  or  railroad  companies, 
may  be  exercised  by  them  with  reference  to  canal  companies.. 
[Laws  1895,  §  4,  p.  148;  1  H.  C,  §  1572;  Bal,  §  4336.] 

No  constitutional  or  statutory  prohibition  to  crossing  abutting  harbor 
area.  (State  ex  rel.  Hulme  v.  Gray's  Harbor  R.  Co.,  54  Wash.  530,  103 
Pac.  809.) 

§  477a.     Change  of  Grade  or  Location. 

[§  8738,  Rem.-Bal.]  Any  corporation  may  change  the 
grade  or  location  of  its  road  or  canal,  not  departing  from 
the  general  route  specified  in  the  articles  of  incorporation, 
for  the  purposes  of  avoiding  annoyances  to  public  travel,  or 
dangerous  or  deficient  curves  or  grades,  or  unsafe  or  unsub- 
stantial grounds  or  foundation,  or  for  other  like  reasonable 
causes,  and  for  the  accomplishment  of  such  change  shall  have 
the  same  right  to  enter  upon,  examine,  survey,  and  appro- 
priate the  necessary  lands  and  materials  as  in  the  original 
location  and  construction  of  such  road  or  canal.  [Laws 
1869,  p.  343,  §3;  Cd.  1881,  §2457;  1  H.  C,  §1573;  Bal.,  § 
4337.] 

§  478.     Eminent  Domain— Telegraph  and  Telephone  Com- 
panies. 

[§  9300,  Rem.-Bal.]  The  right  of  eminent  domain  is 
hereby  extended  to  all  telegraph  and  telephone  corporations 
and  companies  organized  or  doing  business  in  this  state 
[Laws  1890,  §  1,  p.  292 ;  1  H.  C,  §  1547 ;  Bal.,  §  4355.] 


§§  479^481      EXISTING   CORPORATION   LAWS,   1913,  334 

A  company  may  condemn  land  in  accordance  with  its  special  charter 
or  subsequent  general  law.  (Cascades  E.  Co.  v.  Johns,  1  Wash.  Ter. 
557.) 

§  479.  Telegraph  and  Telephone  Companies  may  Condemn. 
[§  9301,  Rem.-Bal.]  Every  corporation  incorporated  under 
the  laws  of  this  state  or  any  state  or  territory  of  the  United 
States  for  the  purpose  of  constructing,  operating  or  maintain- 
ing any  telegraph  or  telephone  in  this  state,  shall  have  the 
right  to  enter  upon  any  land  between  the  termini  of  its  pro- 
posed lines  of  telegraph  or  telephone  for  the  purpose  of  ex- 
amining, locating  and  surveying  the  line  of  such  telegraph 
or  telephone,  doing  no  unnecessary  damage  thereby,  [Laws 
1888,  §  1,  p.  65;  1  H,  C,  §  1548;  Bal.,  §  4356.] 

§  480.    Extent — Right  to  Railway  Line. 

[§  9304,  Rem.-Bal.]  Such  telegraph  or  telephone  company 
may  appropriate  so  much  land  as  may  be  actually  necessary 
for  its  line  of  telegraph  or  telephone,  with  the  right  to  enter 
upon  lands  immediately  adjacent  thereto,  for  the  purpose  of 
constructing,  maintaining  and  operating  its  line  and  making 
all  necessary  repairs.  Such  telegraph  or  telephone  company 
may  also,  for  the  purpose  aforesaid,  enter  upon  and  appro- 
priate such  portion  of  the  right  of  way  of  any  railroad  com- 
pany as  may  be  necessary  for  the  construction,  maintenance 
and  operation  of  its  telegraph  or  telephone  line:  Provided, 
however,  that  such  appropriation  shall  not  obstruct  such  rail- 
road or  the  travel  thereupon,  nor  interfere  with  the  operation 
of  such  railroad.  [Laws  1888,  §  2,  p.  66 ;  1  H.  C,  §  1549 ; 
Bal.,  §  4359.] 

§  481.  Mining  Companies  —  Reduction  Works  —  Eminent 
Domain. 
[§  7344,  Rem.-Bal.]  The  right  of  eminent  domain  is  hereby 
extended  to  all  corporations  incorporated  or  that  may  here- 
after be  incorporated  under  the  laws  of  this  state  or  any  state 
or  territory  of  the  United  States,  and  doing  business  in  this 
state,  for  the  purpose  of  acquiring,  owning  or  operating  mines, 


335        APPROPRIATION    OP    LANDS    AND    HIGHWAYS.       §§  482-484 

mills,  or  reduction  works,  or  mining  or  milling  gold  and  silver 
or  other  minerals,  which  may  desire  to  erect  and  operate  sur- 
face tramways  or  elevated  cable  tramways  for  the  purpose  of 
carrying,  conveying  or  transporting  the  products  of  such 
mines,  mills  or  reduction  works.  [Laws  1897,  §  1,  p.  95 ;  Bal., 
§  4282.] 

A  company  may  condemn  land  in  accordance  with  its  special  charter 
or  subsequent  general  law.  (Cascades  E.  Co.  t.  Sohms,  1  Wash.  Ter. 
557.) 

§  482.    Right  to  Enter  Lands  for  Survey,  etc. 

[§  7345,  Rem.-Bal.]  Every  corporation  incorporated  or 
that  may  hereafter  be  incorporated  under  the  laws  of  this 
state  or  any  state  or  territory  of  the  United  States,  and  doing 
business  in  this  state,  for  the  purpose  of  acquiring,  owning  or 
operating  mines,  mills  or  reduction  works,  or  mining  or  mill- 
ing gold  and  silver  or  other  minerals,  which  may  desire  to  erect 
and  operate  surface  tramways  or  elevated  cable  tramways 
for  the  purpose  of  carrying,  conveying  or  transporting  the 
products  of  such  mines,  mills  or  reduction  works,  shall  have 
the  right  to  enter  upon  any  land  between  the  termini  of  the 
proposed  lines  for  the  purpose  of  examining,  locating  and 
surveying  such  lines,  doing  no  unnecessary  damage  thereby. 
[Laws  1897,  §  2,  p.  95;  Bal.,  §  4283.] 

§  483.    Procedure  as  in  Other  Cases. 

[§  7346,  Rem.-Bal.]  Every  such  corporation  shall  have  the 
right  to  appropriate  real  estate  or  other  property  for  right 
of  way  in  the  same  manner  and  under  the  same  procedure  as 
now  is  or  may  be  hereafter  provided  by  the  law  in  the  case  of 
other  corporations  authorized  by  the  laws  of  this  state  to 
exercise  the  right  of  eminent  domain.  [Laws  1897,  §  3,  p.  95  j 
Bal.,  §  4284.] 

§  484.    Electric  Railways  may  Condemn. 

[See  §§  9080,  9081,  Rem.-Bal.]  The  right  of  eminent  do- 
main is  hereby  extended  to  all  corporations  incorporated  or 
that  may  hereafter  be  incorporated  under  the  laws  of  this  state 
or  any  state  or  territory  of  the  United  States  and  doing  busi- 
ness in  this  state  for  the  purpose  of  transmitting  electric  power 


§§  485-487    EXISTING  corporation  laws,  1913.  336 

by  wire,  cable  or  by  any  other  means ;  or  for  operating  rail- 
way's or  railroads  by  electric  power:  Provided,  however,  that 
said  right  of  eminent  domain  shall  not  be  exercised  with  re- 
spect to  any  residence  or  business  structure  or  structures, 
public  road  or  street.      [Laws  1899,  §  1,  p.  147.] 

§  485.     Right  to  Enter  Lands  for  Survey,  etc. 

[§  9083,  Kem.-Bal.]  Every  such  corporation  shall  have  the 
right  to  enter  upon  any  land  between  the  termini  of  the  pro- 
posed lines  for  the  purpose  of  examining,  locating  and  survey- 
ing such  lines,  doing  no  unnecessary  damage  thereby.  [Laws 
1899,  §2,  p.  147.] 

"Such"  means  electric  power  and  electric  railroad  companies.  (Laws 
1899,  sec.  1,  p.  147.) 

§  486.    Procedure  as  in  Other  Cases. 

[See  §§  9080,  9081,  Rem.-Bal.]  Every  such  corporation 
shall  have  the  right,  subject  to  the  proviso  contained  in  section 
1  hereof  [9080,  Rem.-Bal],  to  appropriate  real  estate  or  other 
property  for  right  of  way  or  for  any  corporate  purposes  in 
the  manner  and  under  the  same  procedure  as  now  is  or  may 
hereafter  be  provided  by  law  in  the  case  of  other  corpora- 
tions authorized  by  the  laws  of  this  state  to  exercise  the 
right  of  eminent  domain.     [Laws  1899,  §  3,  p.  148.] 

"Such"  means  electric  power  and  electric  railroad  companies.  (Laws 
1899,  sec.  1,  p.  147.) 

§  487.    Electric  Power  Companies  may  Condemn. 

[§  934,  Rem.-Bal.]  The  right  of  eminent  domain  is  here- 
by extended  to  all  corporations  incorporated  or  that  may 
hereafter  be  incorporated  under  the  laws  of  this  state  or  any 
state  or  territory  of  the  United  States,  and  doing  business  in 
this  state,  for  the  purpose  of  transmitting  electric  power  by 
wire,  cable  or  by  any  other  means:  Provided,  however,  that 
said  right  of  eminent  domain  shall  not  be  exercised  in  respect 
to  any  residence  or  business  structure  or  structures.  [Laws 
1895,  §1,  p.  80;Bal.,  §5648.] 

A  company  may  condemn  land  in  accordance  with  its  special  charter 
or  subsequent  general  law.  (Cascades  R.  Co.  v.  Sohms,  1  Wash.  Ter. 
557.) 


337         APPROPRIATION    OF    LANDS    AND    HIGHWAYS.       §§  4:Sa-49() 

A  private  company  generating  power  to  be  sold  at  profit  cannot  hj 
offering  to  serve  the  public  acquire  right  of  eminent  domain.  (Tolt 
Power  etc.  Co.  v.  Superior  Court,  50  Wash.  13,  96  Pac.  519.) 

§  488.     Rig-ht  to  Enter  Lands  for  Survey,  etc. 

[§  935,  Rem.-Bal.]  Every  corporation  incorporated  or 
that  may  hereafter  be  incorporated  under  the  laws  of  this 
state  or  any  state  or  territory  of  the  United  States,  and  doinc: 
business  in  this  state,  for  the  purpose  of  transmitting  electric 
power  by  wire,  cable  or  any  other  means,  shall  have  the  right 
to  enter  upon  any  land  between  the  termini  of  the  proposed 
lines  for  the  purpose  of  examining,  locating  and  surveying 
such  lines,  doing  no  unnecessary  damage  thereby.  [Laws 
1895,  §2,  p.  80;  Bal.,  §5649.] 

§  489.     Procedure  as  in  Other  Cases. 

[§  936,  Rem.-Bal.]  Every  such  corporation  shall  have  the 
right,  subject  to  the  proviso  contained  in  section  1  hereof  [934, 
Rem.-Bal],  to  appropriate  real  estate  or  other  property  for 
right  of  way  or  for  any  corporate  purposes  in  the  same  man- 
ner and  under  the  same  procedure  as  now  is  or  may  be  here- 
after provided  by  the  law  in  the  case  of  other  corporations 
authorized  by  the  laws  of  this  state  to  exercise  the  right  of 
eminent  domain.     [Laws  1895,  §  3,  p.  80;  Bal,  §  5650.] 

§  490.    Water  Power  Companies  may  Condemn. 

[§  9506,  Rem.-Bal.]  The  right  of  eminent  domain  for  the 
purpose  of  appropriating  real  estate  is  hereby  extended  to  all 
corporations  that  are  now  or  that  may  hereafter  be  incorpo- 
rated under  the  laws  of  this  state,  or  of  any  state  or  territory 
of  the  United  States  and  doing  business  in  this  state,  for  the 
purpose  of  conveying  water  by  ditches,  flumes,  pipe-lines, 
tunnels  or  any  other  means  for  the  utilization  of  water  power: 
Provided,  however,  that  said  right  of  eminent  domain  shall  not 
be  exercised  in  respect  to  any  residence  or  business  structure 
or  structures.     [Laws  1901,  §  1,  p.  299.] 

A  company  may  condemn  land  in  accordance  with  its  special  charter 
or  subsequent  general  law.  (Cascades  R.  Co.  v.  Sohms,  1  Wash.  Ter. 
557.) 

22 


§§  491-493      EXISTING    CORPORATION    LAWS,    1913.  338 

A  private  company  generating  power  to  be  sold  at  profit  cannot  by 
offering  to  serve  the  public  acquire  right  of  eminent  domain.  (State 
ex  rel.  Tolt  Power  etc.  Co.  v.  Superior  Court,  50  Wash.  13,  96  Pac.  519.) 

§  491.     Right  to  Enter  Lands  for  Survey,  etc. 

[§  9507,  Rem.-Bal]  Every  corporation  that  is  now  or  that 
may  hereafter  be  incorporated  under  the  laws  of  this  state,  or 
of  any  other  state  or  territory  of  the  United  States  and  doing 
business  in  this  state,  for  the  purpose  of  conveying  water  by 
ditches,  flumes,  pipe-lines,  tunnels  or  any  other  means  for  the 
utilization  of  water  power  shall  have  the  right  to  enter  upon 
any  land  between  the  termini  of  the  proposed  ditches,  flumes, 
pipe-lines,  tunnels  or  any  other  means  for  the  utilization  of 
water  power,  for  the  purpose  of  examining,  locating  and  sur- 
veying such  ditches,  flumes,  pipe-lines,  tunnels  or  any  other 
means  for  the  utilization  of  water-power,  doing  no  unnecessary 
damage  thereby.     [Laws  1901,  §  2,  p.  299.] 

§  492.     Procedure  as  in  Other  Cases. 

[§  9508,  Rem.-Bal.]  Every  such  corporation  shall  have  the 
right,  subject  to  the  proviso  contained  in  section  1  hereof 
[9506,  Rem.-Bal.],  to  appropriate  real  estate  or  other  prop- 
erty for  a  right  of  way  for  such  ditches,  flumes,  pipe-lines, 
tunnels  or  other  means  of  conveying  water,  and  for  any  other 
corporate  purposes,  in  the  same  manner  and  under  the  same 
procedure  as  now  is  or  may  be  hereafter  provided  by  law  in 
the  case  of  other  corporations  authorized  by  the  laws  of  the 
state  to  exercise  the  right  of  eminent  domain.  [Laws  1901, 
§  3,  p.  300.] 

§  493.     Canal  and  Irrigation  Companies  may  Condemn. 

[§  9510,  Rem.-Bal.]  All  corporations,  authorized  to  do 
business  in  this  state,  and  who  have  been  or  may  hereafter  be 
organized  for  the  purpose  of  erecting  and  maintaining  flumes 
and  aqueducts  to  convey  water  for  consumption  for  mining, 
irrigation,  milling  or  other  industrial  purposes,  shall  have  the 
same  right  to  appropriate  lands  for  necessary  corporate  pur- 
poses, and  under  the  same  regulations  and  instructions  as 
are  provided  for  other  corporations;  and  such  corporations 
organized  for  such  purposes,  in  order  to  carry  out  the  object 


339  APPROPRIATION   OP  LANDS   AND   HIGHWAYS.  §  494 

of  their  incorporation,  are  authorized  to  take  and  use  any 
v/ater  not  otherwise  legally  appropriated.  [Laws  1879,  §  1, 
p.  134;  Cd.  1881,  §  2472;  1  H.  C,  §  1587;  Bal.,  §  4281a.] 

A  company  may  condemn  land  in  accordance  with  its  special  charter 
or  subsequent  general  law.  (Cascades  R.  Co.  v.  Sohms,  1  Wash.  Ter. 
557.) 

Irrigation  company  is  farming  corporation  authorized  by  laws  of 
1873.     (Ellis  V.  Pomeroy  Imp.  Co.,  1  Wash.  572,  21  Pac.  27.) 

§  494.     Right  of  Easement. 

There  is  hereby  granted  to  persons,  firms  and  corporations 
organized  among  other  things,  for  irrigation  and  power  pur- 
poses, the  right  to  construct  and  maintain  dams  and  works  in- 
cident thereto,  over,  upon  and  across  the  beds  of  the  rivers  of 
the  state  of  Washington  in  connection  with  such  power  and 
irrigation  purposes,  and  there  is  hereby  granted  to  such  per- 
sons, firms  and  corporations  an  easement  over,  upon  and  across 
the  beds  of  such  rivers  for  such  purposes.  Such  easement 
shall  be  limited,  however,  to  so  much  of  the  beds  of  such  rivers 
as  may  be  reasonably  convenient  and  necessary  for  such  uses. 
All  such  dams  and  works  shall  be  completed  within  five  years 
after  the  commencement  of  construction  work  upon  the  same. 
The  rights  and  privileges  granted  by  this  act  shall  inure  to 
the  benefit  of  such  persons,  firms  or  corporations  from  the  date 
of  the  commencement  of  construction  work  upon  such  dams 
and  works  incident  thereto,  and  such  construction  work  shall 
be  diligently  prosecuted  to  completion,  and  the  rights,  privi- 
leges and  easements  granted  by  this  act  shall  continue  so  long 
as  the  same  shall  be  utilized  by  the  grantees  for  the  purposes 
herein  specified,  and  the  failure  to  maintain  and  use  such 
dams  and  works  after  the  same  shall  have  been  constructed, 
for  a  continuous  period  of  two  years,  shall  operate  as  a  f orf eit^ 
ure  of  all  the  rights  hereby  granted  and  the  same  shall  revert 
to  the  state  of  "Washington :  Provided,  that  nothing  in  this  act 
shall  be  construed  in  such  a  way  as  to  interfere  with  the  use 
of  said  rivers  for  navigation  purposes,  and  all  of  such  rights, 
privileges  and  easements  granted  hereby  shall  be  subject  to 
the  paramount  control  of  such  rivers  for  navigation  purposes 
by  the  United  States :  And  provided  further,  that  the  use  and 


§  495  EXISTING  CORPOILVTION   LAWS,   1913.  340 

enjoyment  of  the  grants  and  privileges  of  this  act  shall  not 
interfere  with  the  lawful  and  rightful  diversion  of  the  waters 
of  said  rivers  by  other  parties  under  water  appropriations  in 
existence  at  the  time  any  such  persons,  firms  or  corporations 
shall  avail  themselves  of  the  benefits  and  privileges  of  this 
act,  but  no  such  persons,  firms  or  corporations  shall  have  any 
right  to  construct  any  such  dams  or  works  over,  upon  or  across 
the  land  between  ordinary  high  water  and  extreme  low  water 
of  any  river  of  this  state  without  first  having  acquired  the 
right  to  do  so  from  the  owner  or  owners  of  the  lands  adjoining 
the  land  between  ordinary  high  water  and  extreme  low  water 
over  or  across  which  said  dam  or  works  are  constructed. 
[Laws  1911,  p.  436.] 

§  495.  May  Sell  Electric  Power  and  Light — Shall  be  Deemed 
Public  Service  Corporation. 
[§4974,  Rem.-Bal.]  Any  corporation  authorized  to  do 
business  in  this  state,  which,  under  the  present  laws  of  the 
state,  is  authorized  to  condemn  property  for  the  purpose  of 
generating  and  transmitting  electrical  power  for  the  operation 
of  railroads  or  railways,  or  for  municipal  lighting,  and  which 
by  its  charter  or  articles  of  incorporation,  assumes  the  addi- 
tional right  to  sell  electric  power  and  electric  light  to  private 
consumers  outside  the  limits  of  a  municipality  and  to  sell 
electric  power  to  private  consumers  within  the  limits  of  a 
municipality,  which  shall  provide  in  its  articles  that  in  respect 
of  the  purposes  mentioned  in  this  section  it  will  assume  and 
undertake  to  the  state  and  to  the  inhabitants  thereof  the  duties 
and  obligations  of  a  public  service  corporation,  shall  be 
deemed  to  be  in  respect  of  such  purposes  a  public  service 
corporation,  and  shall  be  held  to  all  the  duties,  obligations 
and  control,  which  by  law  are  or  may  be  imposed  upon  public 
service  corporations.  Any  such  corporation  shall  have  the 
right  to  sell  electric  light  outside  the  limits  of  a  municipality 
and  electric  power  both  inside  and  outside  such  limits  to 
private  consumers  from  the  electricity  generated  and  trans- 
mitted by  it  for  public  purposes  and  not  needed  by  it  there- 
for: Provided,  that  such  corporation  shall  furnish  such  excess 


341  APPROPRIATION   OP  LANDS    AND   HIGHWAYS.  §496 

power  at  equal  rates,  quantity  and  conditions  considered,  to 
all  consumers  alike,  and  shall  supply  it  to  the  first  applicants 
therefor  until  the  amount  available  shall  be  exhausted :  Pro- 
vided, further,  that  no  such  corporation  shall  be  obliged  to 
furnish  such  excess  power  to  any  one  consumer  to  an  amount 
exceeding  twenty-five  per  cent  of  the  total  amount  of  such 
excess  power  generated  or  transmitted  by  it.  In  exercising 
the  power  of  eminent  domain  for  public  purposes  it  shall  not 
be  an  objection  thereto  that  a  portion  of  the  electric  current 
generated  will  be  applied  to  private  purposes,  provided  the 
principal  uses  intended  are  public:  Provided,  that  all  public 
service  or  quasi-public  service  corporations  shall  at  no  time 
sell,  deliver  and  dispose  of  electrical  power  in  bulk  to  manu- 
facturing concerns  at  the  expense  of  its  public  service  func- 
tions, and  any  person,  firm  or  corporation  that  is  a  patron  of 
such  corporation  as  to  such  public  function,  shall  have  the 
right  to  apply  to  any  court  of  competent  jurisdiction  to  cor- 
rect any  violation  of  the  provisions  of  this  act.  [Laws  1907 
§  1,  p.  349.] 

A  private  company  generating  power  to  be  sold  at  profit  cannot,  by 
offering  to  serve  the  public,  acquire  the  right  of  eminent  domain.  (State 
ex  rel.  Tolt  Power  etc.  Co.  v.  Superior  Court,  50  Wash.  13,  96  Pac.  519.) 

Condemnation  of  water-power  for  generating  electric  power  to  be 
supplied  municipal  and  public  lighting  and  common  carrying  railroads 
is  for  authorized  public  use  (State  ex  rel.  Dominick  v.  Superior  Court, 
52  Wash.  196)  ;  but  generating  power  for  commercial  purposes  generally 
ia  not  public  use.  (State  ex  rel.  Shropshire  v.  Superior  Court,  51 
Wash.  386.) 

§  496.     Electricity  not  to  be  Used  for  Private  Enterprises. 

[§4975,  Rem.-Bal.]  Whenever  any  corporation  has  ac- 
quired any  property  by  decree  of  appropriation  based  on  pro- 
ceedings in  court  under  the  provisions  of  this  act,  no  portion 
of  the  electricity  generated  or  transmitted  by  it  by  means  of 
the  property  appropriated  under  the  provisions  of  this  act 
shall  be  used  or  applied  by  such  corporation  for  or  to  a  busi- 
ness or  trade  not  under  the  present  laws  deemed  public  or 
quasi-public  conducted  by  itself.     [Laws  1907,  §  2,  p.  350.] 


§  497  EXISTING  CORPORATION  LAWS,  1913.  342 

Sale  of  electric  power  to  the  public  not  public  use,  (State  ex  rel. 
Harris  v.  Superior  Court,  42  Wash.  660,  85  Pac.  666.) 

A  private  company  generating  power  to  be  sold  at  profit  cannot,  by 
offering  to  serve  the  public,  acquire  the  right  of  eminent  domain.  (State 
ex  rel.  Tolt  Power  etc.  Co.  v.  Superior  Court,  50  Wash.  13,  96  Pac.  519.) 

§  497.    Violation  Forfeiture  of  Franchise. 

[§  4976,  Rem.-Bal.]  In  the  event  of  the  violation  of  any  of 
the  requirements  of  this  act  by  any  corporation  availing  itself 
of  its  provisions,  an  appropriate  suit  may  be  maintained  in 
the  name  of  the  state  upon  the  relation  of  the  attorney  general, 
or  if  he  shall  refuse  or  neglect  to  act  upon  the  relation  of  any 
individual  aggrieved  by  the  violation  or  violations,  complained 
of,  to  compel  such  corporation  to  comply  with  the  requirements 
of  this  act.  A  violation  of  this  act  shall  cause  the  forfeiture 
of  the  corporate  franchise  if  the  corporation  refuses  or  neglects 
to  comply  with  the  orders  with  respect  thereto  made  in  the 
suit  herein  provided  for.     [Laws  19Q7,  §  3,  p.  350.] 


343  RAILROAD    CORPORATIONS,    ETC.  §  498 


RAILROAD  CORPORATIONS  AND  OTHER 
TRANSPORTATION  COMPANIES. 

§  408.    Railroad  may  Build  Branch  Lines. 

[§  8662,  Rem.-Bal.]  Any  railroad  corporation  chartered 
by,  or  organized  under,  the  laws  of  the  state,  or  of  any  state 
or  territory,  or  under  the  laws  of  the  United  States,  and  au- 
thorized to  do  business  in  this  state,  may  extend  its  railroad 
from  any  point  named  in  its  charter  or  articles  of  incorpora- 
tion, or  may  build  branch  roads  either  from  any  point  on  its 
line  of  road  or  from  any  point  on  the  line  of  any  other  railroad 
connecting,  or  to  be  connected,  with  its  road,  the  use  of  which 
other  road  between  such  points  and  the  connection  with  its 
own  road  such  corporation  shall  have  secured  by  lease  or 
agreement  for  a  term  of  not  less  than  ten  years  from  its  date ; 
before  making  any  such  extension  or  building  any  such  branch 
road,  such  corporation  shall,  by  resolution  of  its  directors  or 
trustees,  to  be  entered  in  the  record  of  its  proceedings,  desig- 
nate the  route  of  such  proposed  extension  or  branch  by  indi- 
cating the  place  from  and  to  which  said  railroad  is  to  be 
constructed,  and  the  estimated  length  of  such  railroad,  and  the 
name  of  each  county  in  this  state  through  or  into  which  it  is 
constructed  or  intended  to  be  constructed,  and  file  a  copy 
of  such  record,  certified  by  the  president  and  secretary,  in  the 
office  of  the  Secretary  of  State,  who  shall  indorse  thereon  the 
date  of  the  filing  thereof  and  record  the  same.  Thereupon 
such  corporation  shall  have  all  the  rights  and  privileges  to 
make  such  extension  or  build  such  branch  and  receive  aid 
thereto  which  it  would  have  had  if  it  had  been  authorized  in 
its  charter  or  articles  of  incorporation.  [Laws  1890,  §  1, 
p.  526;  1  H.  C,  §1535;  Bal.,  §4303.] 

Charter  authority  to  build  specified  branch  does  not  authorize  branches 
generally,  and  under  Hill's  Code,  section  1535  (Bal.  Code,  sec.  4303), 
copy  of  designated  route  must  be  filed  with  the  Secretary  of  State. 
(Biles  V.  Tacoma  etc.  E.  Co.,  5  Wash.  509,  32  Pac.  211.) 

In  the  absence  of  legislation,  mandamus  will  issue  to  compel  a  rail- 
road to  stop  trains  and  furnish  a  depot  where  public  need  requires  it. 


§  498  EXISTING  CORPORATION   LAWS,   1913.  344 

(Northern  Pacific  K.  Co.  v.  Territory  ex  rel.  Dustin,  3  Wash.  Ter.  303, 
13  Pac.  604;  reversed,  142  U.  S.  492.) 

A  railroad  company  which  has  constructed  its  road  on  unsurveyed  pub- 
lic land  has  right  thereto  against  subsequent  locator  of  mining  claim. 
(Penn.  Min.  &  I.  Co.  v.  Everett  &  M.  C.  R.  Co.,  29  Wash.  102,  69  Pac. 
628.) 

Grant  of  railroad  right  of  way  across  public  lands  does  not  attach 
to  settler's  land  until  after  condemnation.  (Slaght  v.  Northern  Pac.  R. 
Co.,  39  Wash.  576,  81  Pac.  1062.) 

A  railroad  right  of  way  is  an  easement  and  not  a  fee  unless  latter  is 
granted  expressly.  (Reichenbach  v.  Wash.  Short  Line  R.  Co.,  10  Wash. 
357,  38  Pac.  1126.) 

Railroad  crossing  another  must  accommodate  itself  to  the  established 
way  of  the  latter.  (Seattle  &  M.  R.  Co.  v.  State,  7  Wash.  150,  34 
Pac.  551.) 

Lessor  railroad  company  liable  for  damages  for  failure  to  fence  as 
required  by  law.  (Oregon  R.  &  Nav.  Co.  v.  Dacres,  1  Wash.  195,  23 
Pac.  415.) 

The  fact  that  a  car  leaves  the  track  establishes  a  defect  in  the  track 
or  machinery,  or  want  of  proper  operation.  (Walker  v.  McNeill,  17 
Wash.  582,  50  Pac.  518;  Roberts  v.  Port  Blakely  Mill  Co.,  30  Wash. 
25,  70  Pac.  111.) 

The  act  of  1907,  page  530,  section  3,  conferring  on  the  state  railroad 
commission  authority  to  order  trackage  connections  is  not  unlawful  dele- 
gation of  legislative  power.  (State  ex  rel.  Oregon  R.  &  Nav.  Co.  v. 
Railroad  Com.,  52  Wash.  17,  100  Pac.  179.) 

Soliciting  agent  advertised  as  "general  agent"  is  not  agent  to  receive 
service  of  process  under  Ballinger's  Code,  section  4875.  (Arrow  Lumber 
etc.  Co.  V.  Union  Pacific  R.  Co.,  53  Wash.  629,  102  Pac.  650.) 

Under  Laws  of  1907,  page  538,  state  railroad  commission  has  power 
to  order  track  connections  between  different  railways.  (State  ex  rel. 
Oregon  etc.  R.  Co.  v.  Railroad  Commission,  52  Wash.  17,  100  Pac.  179.) 

Where  a  domestic  railway  company  adopted  its  location  at  directors' 
meeting  held  in  another  state,  subsequent  bringing  of  condemnation  pro- 
ceedings in  the  state  is  sufficient  adoption.  (State  ex  rel.  Biddle  v. 
Superior  Court,  44  Wash.  108,  87  Pac.  40.) 

An  order  of  the  railroad  commission  requiring  a  railroad  depot  to  be 
moved  five  hundred  feet  in  town  of  seventy-five  people  to  bring  it  nearer 
business  center  unreasonable.  (State  ex  rel.  Gt.  Northern  R.  Co.  v. 
Railroad  Commission,  60  Wash.  218,  110  Pac.  1075.) 

Railroad  fence  act  of  1893,  Remington  and  Ballinger's  Code,  section 
8729,  is  impliedly  repealed  by  acts  of  1903  and  1907,  Remington  and 
Ballinger's  Code,  section  8730,  providing  that  owner  shall  have  right  to 
put  in  gates.  (Huffman  v.  Oregon  R.  &  Nav.  Co.,  57  Wash.  494,  107 
Pac.  362.) 


345  RAILROAD   CORPORATIONS,    ETC.  §  499 

§  499.     Consolidation  of  Railroads — Leases,  etc. 

[§8665,  Rem.-Bal.]  That  an.y  railroad  compan.y  now  or 
hereafter  incorporated,  pursuant  to  the  laws  of  this  state  or  of 
the  United  States,  or  of  any  state  or  territory  of  the  United 
States,  may  at  any  time  by  means  of  subscription  to  the  capital 
stock  of  any  other  railroad  company,  or  by  the  purchase  of  its 
stock  or  bonds,  or  by  guaranteeing  its  bonds,  or  otherwise,  aid 
such  company  in  the  construction  of  its  railroad  within  or 
without  this  state  ;  and  any  such  company  owning  or  operating 
a  railroad  within  or  without  this  state,  may  extend  the  same 
into  this  or  any  other  state  or  territory,  and  may  build,  buy, 
or  lease  the  whole  or  any  part  of  any  other  railroad,  together 
with  the  franchises,  powers  and  immunities  and  all  other  prop- 
erty and  appurtenances  appertaining  thereto,  whether  located 
within  or  without  this  state ;  or  may  consolidate  with  any  rail- 
road or  railroads  in  such  other  state  or  territory,  or  with  any 
other  railroad  in  this  state,  and  may  operate  the  same,  and 
may  own  such  real  estate  and  other  property  in  such  other 
state  or  territory  as  may  be  necessary  or  convenient  in  the 
operation  of  such  road ;  and  any  such  railroad  company  may 
sell  or  lease  the  whole  or  any  part  of  its  railroad  and  branches, 
within  or  without  this  state,  constructed  or  to  be  constructed, 
together  with  all  property,  rights,  privileges  and  franchises 
appertaining  thereto,  to  any  railroad  company  organized  or 
existing  pursuant  to  the  laws  of  the  United  States  or  of  this 
state,  or  of  any  other  state  or  territory  of  the  United  States ; 
and  any  railroad  company  incorporated  or  existing  under  the 
laws  of  the  United  States,  or  of  any  state  or  territory  of  the 
United  States,  may  extend,  construct,  maintain  and  operate 
its  railroad,  or  any  portion  or  branch  thereof,  into  and  through 
this  state,  and  may  build  branches  from  any  point  on  such 
extension  to  any  place  or  places  within  this  state,  and  the 
railroad  company  of  any  other  state  or  territory  of  the  United 
States  which  shall  so  purchase  or  lease  a  railroad,  or  any 
part  thereof  in  this  state,  or  consolidate  with  any  such  rail- 
road in  this  state,  or  shall  extend  or  construct  its  road,  or  any 
portion  or  branch  thereof  in  this  state,  shall  possess  and  may 
exercise  and  enjoy  as  to  the  location,  control,  management 


§  499  EXISTING  CORPORATION  LAWS,  1913.  346 

and  operation  of  the  said  road,  and  as  to  the  location,  con- 
struction and  operation  of  any  extension  or  branch  thereof, 
all  the  rights,  powers,  privileges  and  franchises  possessed  by 
railroad  corporations  organized  under  the  laws  of  this  state, 
including  the  exercise  of  the  power  of  eminent  domain.  Such 
purchase,  sale,  consolidation  or  lease  may  be  made,  or  such 
aid  furnished,  upon  such  terms  or  conditions  as  may  be  agreed 
upon  by  the  directors  and  trustees  of  the  respective  com- 
panies; but  the  same  shall  be  approved  or  ratified  by  persons 
holding  or  representing  seventy-five  per  cent  of  the  capital 
stock  of  each  of  such  companies,  respectively,  at  any  annual 
stockholders'  meeting,  or  at  a  special  meeting  of  the  stock- 
holders called  for  that  purpose,  or  by  the  approval  in  writing 
of  seventy-five  per  cent  of  the  stockholders  of  each  company, 
respectively.  Articles  stating  the  name  selected  for  such  con- 
solidated corporation  and  the  terms  of  such  consolidation  shall 
be  approved  by  each  corporation  by  the  vote  of  the  stock- 
holders holding  seventy-five  per  cent  of  the  stock,  in  person 
or  by  proxy,  at  a  regular  meeting  thereof,  or  a  special  meeting 
called  for  that  purpose  in  the  manner  provided  by  the  by-laws 
of  the  respective  consolidating  corporations,  or  by  the  consent 
in  writing  of  such  seventy-five  per  cent  of  such  stockholders 
annexed  to  such  articles ;  and  a  copy  thereof,  with  a  copy  of 
the  records  of  such  approval  or  consent,  duly  certified  by  the 
respective  presidents  and  secretaries,  with  the  corporate  seals 
of  such  corporations  affixed  thereto,  shall  be  filed  for  record 
in  the  office  of  the  Secretary  of  State,  and  a  copy  thereof  be  fur- 
nished to  the  State  Railroad  Commission  [now  Public  Service 
Commission]  ;  and  thereupon  such  consolidating  corporations 
shall  be  and  become  one  corporation,  by  the  name  so  selected, 
which,  within  this  state,  shall  possess  all  the  powers,  fran- 
chises, and  immunities,  including  the  right  of  further  con- 
solidation with  other  corporations,  and  be  subject  to  all  the 
liabilities  and  restrictions  now  or  hereafter  imposed  by  law: 
Provided,  that  no  railroad  or  transportation  corporation  shall 
consolidate  its  stock,  property,  or  franchises  with  any  other 
railroad  or  transportation  corporation  owning  a  competing 
line,  or  purchase  either  directly  or  indirectly,  any  stock  or 


i 


347  RAILROAD    CORPORATIONS,    ETC.  §  499 

interest  in  a  railroad  or  transportation  corporation  owning 
or  operating  a  competing  line:  And  provided  further,  that 
nothing  in  the  foregoing  provisions  shall  be  held  or  construed 
as  curtailing  the  right  of  this  state,  or  of  the  counties  through 
which  any  such  road  or  roads  may  be  located,  to  levy  and  col- 
lect taxes  upon  the  same,  and  upon  the  rolling  stock  thereof, 
in  conformity  with  the  provisions  of  the  laws  of  this  state 
upon  that  subject,  and  all  roads  or  branches  thereof  in  this 
state  so  consolidated  with,  purchased  or  leased,  or  aided,  or 
extended  into  this  state,  shall  be  subject  to  taxation  and  to 
regulation  and  control  of  its  operation  by  the  laws  of  this 
state  in  all  respects  the  same  as  if  constructed  by  corporations 
organized  under  the  laws  of  this  state;  and  any  corporation 
of  another  state  or  territory  or  of  the  United  States,  being 
the  purchaser  or  lessee  of  a  railroad  within  this  state,  or  ex- 
tending its  railroad  or  any  portion  thereof  into  or  through 
this  state,  shall  establish  and  maintain  an  office  or  offices  in 
this  state,  at  some  point  or  points  on  its  line,  at  which  legal 
process  and  notice  may  be  served  as  upon  railroad  corpora- 
tions of  this  state :  Provided  further,  that  before  any  railroad 
corporation  organized  under  the  laws  of  any  other  state  or 
territory,  or  of  the  United  States,  shall  be  permitted  to  avail 
itself  of  the  benefits  of  this  act  with  respect  to  any  railroad 
constructed,  or  to  be  constructed  within  this  state,  such  cor- 
poration shall  file  with  the  Secretary  of  State  a  true  copy 
of  its  charter  or  articles  of  incorporation,  and  otherwise  com- 
ply with  the  laws  of  this  state  respecting  foreign  corporations 
doing  business  within  the  state :  Provided,  that  any  such  con- 
solidation shall  be  approved  by  the  State  Railroad  Commis- 
sion [now  Public  Service  Commission]  :  Provided  further, 
that,  in  no  case,  shall  the  capital  stock  of  the  company  formed 
by  such  consolidation  exceed  the  sum  of  the  capital  stock  of 
the  companies  so  consolidated,  at  the  par  value  thereof. 
[Laws  1909,  §  1,  p.  698;  1  H.  C,  §  1536.] 

Minority  stockholders  may  maintain  suit  to  annul  illegal  traffic  agree- 
ment.    (Earl  y.  Seattle  etc.  E.  Co.,  56  Fed.  909.) 

Two  competing  roads  may  legally  arrange  to  take  each  one-half  the 
stock  in  a  new  company  opening  up  new  territory.  (Cascade  E.  Co.  v. 
Superior  Court,  51  Wash.  346.) 


§§500,501      EXISTING   CORPORATION  LAWS,   1913.  348 

§  500.     Prior  Sales,  etc.,  Legalized. 

[§  8666,  Rem.-Bal.]  Any  sale  or  purchase  of  and  any  con- 
solidation by  sale,  or  otherwise,  or  any  lease,  or  agreement  to 
sell,  consolidate  with  or  lease,  the  whole  or  any  part  of  any  rail- 
road, or  the  branch  lines  of  any  company,  whether  organized 
or  located  within  or  without  this  state,  with  the  franchise  ap- 
pertaining thereto,  to,  from  or  with  any  railroad  company 
organized  under  the  laws  of  the  United  States  or  of  this  state  or 
any  other  state  or  territory,  or  any  consolidation  between  such 
companies,  heretofore  executed  by  the  proper  officers  of  the  re- 
spective companies,  parties  to  such  sale,  lease  or  consolidation 
or  contract,  is  hereby  legalized  and  made  in  all  respects  valid 
and  binding  from  the  date  of  its  execution :  Provided,  that  the 
provisions  of  this  section  shall  not  apply  when  the  railroads  or 
transportation  corporations  involved  are  competing  lines. 
[Laws  1909,  §  2,  p.  701.] 

§  501.     Extension  in  This  State  of  Foreign  Lines. 

[§  8668,  Rem.-Bal.]  Any  railroad  corporation  chartered  by 
or  organized  under  the  laws  of  the  United  States,  or  of  any 
state  or  territory,  whose  constructed  railroad  shall  reach  or 
intersect  the  boundary  line  of  this  state  at  any  point,  may  ex- 
tend its  railroad  into  this  state  from  any  such  point  or  points 
to  any  place  or  places  within  the  state,  and  may  build  branches 
from  any  point  on  such  extension.  Before  making  such  ex- 
tension or  building  any  such  branch  road,  such  corporation 
shall,  by  resolution  of  its  directors  or  trustees,  to  be  entered 
in  the  record  of  its  proceedings,  designate  the  route  of  such 
proposed  extension  or  branch  by  indicating  the  place  from 
and  to  which  such  extension  or  branch  is  to  be  constructed, 
and  the  estimated  length  of  such  extension  or  branch,  and  the 
name  of  each  county  in  this  state  through  or  into  which  it  is 
constructed  or  intended  to  be  constructed,  and  file  a  copy  of 
such  record,  certified  by  the  president  and  secretary,  in  the 
office  of  the  Secretary  of  State,  who  shall  indorse  thereon  the 
date  of  filing  thereof,  and  record  the  same.  Thereupon  such 
corporation  shall  have  all  the  rights  and  privileges  to  make 
such  extension  or  build  such  branch  and  receive  such  aid 


349-  RAILROAD    CORPORATIONS,    ETC.  §§502,503 

thereto  as  it  would  have  had  had  it  been  authorized  so  to  do 
by  articles  of  incorporation  duly  filed  in  accordance  with  the 
laws  of  this  state.  [Laws  1890,  §  3,  p.  527;  1  H.  C,  §  1537; 
Bal.,  §  4305.] 

Foreign  corporation  is  authorized  to  construct  lines  within  the  state. 
(Miller  v.  Griffin,  46  Wash.  489.) 

Adoption  of  location  by  domestic  company  at  directors'  meeting  in 
another  state  ratified  by  condemnation  proceedings  when  instituted  within 
the  state.      (State  ex  rel.  Biddle  v.  Superior  Court,  44  Wash.  108.) 

§  502.    May  Construct  and  Maintain  Spur  Tracks. 

[§  8667,  Rem.-Bal.]  Any  railroad  corporation  organized 
under  the  laws  of  this  state  or  of  any  other  state,  and  author- 
ized to  do  business  in  this  state  and  owning  or  operating  a 
railway  in  this  state,  may  construct,  maintain  and  operate  pub- 
lic spur  tracks,  from  its  railroad  or  any  branch  thereof,  to 
and  upon  the  grounds  of  any  mill,  elevator,  storehouse,  ware- 
house, dock,  wharf,  pier,  manufacturing  establishment,  lum- 
ber-yard, coal  dock  or  other  industry  or  enterprise,  with  all 
sidetracks,  storage  tracks,  wyes,  turnouts,  and  connections 
necessary  or  convenient  to  the  use  of  the  same ;  and  such  com- 
pany may  acquire  by  purchase  or  condemnation,  in  the  man- 
ner provided  by  the  laws  of  this  state  for  the  acquisition  of 
real  estate  for  railway  purposes,  all  necessary  rights  of  way 
for  such  spur  tracks,  sidetracks,  storage  tracks,  wyes,  turnouts 
and  connections;  said  spur  when  constructed  to  be  a  public 
spur  for  the  use  of  all  industries  located  or  thereafter  located 
thereon:  Provided,  that  the  right  to  acquire  by  condemnation 
herein  granted  shall  not  be  exercised  over  unimproved  lands 
for  a  greater  distance  than  five  miles,  or  over  improved  lands 
for  a  greater  distance  than  one  mile,  or  over  lands  within  the 
limits  of  a  municipal  corporation  for  a  greater  distance  than 
one-fourth  of  a  mile :  Provided  further,  that  this  act  shall  not 
be  construed  as  limiting  the  rights  granted  under  the  operation 
of  the  act  of  March  28,  1890,  relating  to  the  construction  of 
branch  lines.     [Laws  1907,  §  1,  p.  516.] 

§  503.     Subject  to  Laws  of  This  State. 

[§  8669,  Rem.-Bal.]  All  such  railroad  corporations,  con- 
solidated companies  and  their  branches,  including  their  stock 


§§  504,  504a    existing  corporation  laws,  1913.  350 

property  and  franchises,  within  the  jurisdiction  of  this  state, 
shall  be  subject  to  and  controlled  by  the  constitution  and  laws 
of  this  state.  [Laws  1890,  §  4,  p.  528;  1  H.  C,  §  1538;  Bal., 
§  4306.] 

§  504.    May  Build  Bridges  Over  Navigable  Streams. 

[§8670,  Rem.-Bal]  Any  railroad  corporation  heretofore 
duly  incorporated  and  organized  under  the  laws  of  this  state 
or  the  territory  of  Washington,  or  which  may  hereafter  be 
duly  incorporated  and  organized  under  the  laws  of  this  state, 
or  heretofore  or  hereafter  incorporated  and  organized  under 
the  laws  of  any  other  state  or  territory  of  the  United  States, 
and  authorized  to  do  business  in  this  state  and  to  construct 
and  operate  railroads  therein,  shall  have  and  hereby  is  given 
the  right  to  construct  bridges  across  the  navigable  streams 
within  this  state  over  which  the  projected  line  or  lines  of  rail- 
way of  said  railroad  corporations  will  run :  Provided,  that 
said  bridges  are  constructed  in  good  faith  for  the  purpose  of 
being  made  a  part  of  the  constructed  line  of  said  railroad: 
And  provided,  that  they  shall  be  constructed  in  the  course  of 
the  construction  of  said  railroad  or  thereafter  for  the  more 
convenient  operation  thereof :  And  provided  further,  that  such 
bridges  shall  be  so  constructed  as  not  to  interfere  with,  impede 
or  obstruct  the  navigation  of  such  streams.  [Laws  1890, 
§  1,  p.  53 ;  1  H.  C,  §  1539 ;  Bal.,  §  4307.] 

No  constitutional  or  statutory  prohibition  to  crossing  abutting  harbor 
area.  (State  ex  rel.  Hulme  v.  Gray's  Harbor  R.  Co.,  54  Wash.  530, 
103  Pac.  809.) 

Abutting  tide  and  uplands  cannot  be  taken  -without  compensation. 
(North.  Pac.  R.  Co.  v.  Slade  Lumber  Co.,  61  Wash.  1&5,  112  Pac.  240.) 

§  504a.    Right  to  Construct  Bridges. 

[§  8671,  Rem.-Bal. ]  ....  Any  corporation,  copartnership, 
person  or  trustee  heretofore  or  hereafter  by  any  state  or  muni- 
cipal law  or  ordinance  authorized  to  construct  and  operate 
railroads,  interurban  railroads  or  street  railroads  as  common 
carriers  within  this  state,  shall  have  and  hereby  is  given,  the 
right  to  construct  bridges  or  trestles  across  waterways  here- 
tofore or  hereafter  laid  out  under  the  authority  of  the  state 


351  RAILROAD    CORPORATIONS,    ETC.  §§  505-507 

f)f  Washington  over  which  the  projected  line  or  lines  of  rail- 
road will  run:  Provided,  such  bridges  or  trestles  are  con- 
structed in  good  faith  for  the  purpose  of  being  made  a  part 
of  the  constructed  line  of  such  railroad,  and  may  also  have 
included  therewith  the  purpose  of  providing  a  roadway  for 
the  accommodation  of  vehicles  and  foot-passengers.  [Laws 
1909,  p.  605,  §  1.] 

§  505.    May  Guarantee  Irrigation  Securities. 

[§  8663,  Rem.-Bal.]  It  shall  be  lawful  for  any  corporation, 
whether  such  corporation  is  organized  under  the  laws  of  the 
territory  or  state  of  Washington,  the  laws  of  any  other  state 
or  territory,  or  the  laws  of  the  United  States,  owning,  leasing 
or  operating  any  line  or  lines  of  railway  within  the  state  of 
Washington,  or  which  may  own,  lease  or  operate  in  the  future 
any  such  line  or  lines  of  railway  within  this  state,  to  take,  ac- 
quire, own,  negotiate,  sell  and  guarantee  bonds  and  stocks  of 
companies  or  corporations  which  are  or  may  hereafter  be  or- 
ganized for  the  purpose  of  irrigating  and  reclaiming  lands 
within  this  state.  [Laws  1890,  §  1,  p.  529 ;  1  H.  C,  §  1543 ; 
Bal.,  §4311.] 

§  506.    May  Build  Ditches. 

[§  8664,  Rem.-Bal.]  It  shall  be  lawful  for  any  such  cor- 
poration to  build,  own  and  operate  irrigating  ditches  and 
canals  in  this  state  for  the  purpose  of  irrigating  and  reclaim- 
ing arid  lands,  contiguous  to  or  tributary  to  such  line  or  lines 
of  railway.  [Laws  1890,  §2,  p.  529;  1  H.  C,  §  1544;  Bal., 
§4312.] 

Irrigation  ditch  is  public  use.  (Prescott  Irr.  Co.  v.  Flathers,  20 
Wash.  454,  55  Pac.  635;  Weed  v.  Goodwin,  36  Wash.  31,  78  Pac.  36.) 

§  507.    Authority    to    Construct  —  How    and    by    Whom 
Granted. 

[§  4972,  Rem.-Bal.]  The  legislative  authority  of  the  city 
or  town  having  control  of  any  public  street  or  road,  or,  where 
such  street  or  road  is  not  within  the  limits  of  any  incorporated 
city  or  town,  then  the  board  of  county  commissioners  of  the 


§  507  EXISTING  CORPORATION  LAWS,   1913.  352 

county  wherein  such  road  or  street  is  situated,  may  grant  au- 
thority for  the  construction,   maintenance   and  operation  of 
transmission  lines   for  transmitting  electric  power,   together 
with  poles,  wires  and  other  appurtenances,  upon,  over,  along 
and  across  any  such  public  street  or  road,  and  in  granting 
such  authority  the  legislative  authority  of  such  city  or  town, 
or  the  board  of  county  commissioners  as  the  case  may  be,  may 
prescribe  the  terms  and  conditions  on  which  such  transmis- 
sion line  and  its  appurtenances,  shall  be  constructed,  main- 
tained and  operated  upon,  over,  along  and  across  such  road 
or  street,  and  the  grade  or  elevation  at  which  the  same  shall 
be    constructed,    maintained    and    operated:    Provided,    that 
hereafter  on  application  being  made  to  the  board  of  county 
commissioners  for  such  authority,  the  board  shall  fix  a  time 
and  place  for  hearing  the  same,  and  shall  cause  the  county 
auditor  to  give  public  notice  thereof  at  the  expense  of  the  ap- 
plicant, by  posting  written  or  printed  notices  in  three  public 
places  in  the  county  seat  of  the  county,  and  in  at  least  one 
conspicuous  place  on  the  road  or  street  or  part  thereof,  for 
which  application  is  made,  at  least  fifteen  days  before  the 
day  fixed  for  such  hearing,  and  by  publishing  a  like  notice 
three  times  in  some  daily  newspaper  published  in  the  county, 
or  if  no  daily  newspaper  is  published  in  the  co-unty,  then  the 
newspaper  doing  the  county  printing,  the  last  publication  to 
be  at  least  five  days  before  the  day  fixed  for  such  hearing, 
which  notice  shall  state  the  name  or  names  of  the  applicant 
or  applicants,  a  description  of  the  roads  or  streets  or  parts 
thereof  for  which  the  application  is  made,  and  the  time  and 
place  fixed  for  the  hearing.     Such  hearing  may  be  adjourned 
from  time  to  time  by  order  of  the  board.     If  after  such  hear- 
ing the  board  shall  deem  it  to  be  for  the  public  interest  to  grant 
such  authority  in  whole  or  in  part,  the  board  may  make  and 
enter  the  proper  order  granting  the  authority  applied  for  or 
such  part  thereof  as  the  board  deems  to  be  for  the  public 
interest,  and  shall  require  such  transmission  line  and  its  ap- 
purtenances to  be  placed  in  such  location  on  or  alsng  the  road 
or  street  as  the  board  finds  will  cause  the  least  interference 
with  other  uses  of  the  road  or  street.     In  case  any  such  trans- 


353  RAILROAD    CORPORATIONS,    ETC.  §  508 

mission  line  is  or  shall  be  located  in  part  on  private  right  of 
way,  the  owner  thereof  shall  have  the  right  to  construct  and 
operate  the  same  across  any  county  road  or  county  street 
which  intersects  such  private  right  of  way,  if  such  crossing  is 
so  constructed  and  maintained  as  to  do  no  unnecessary  dam- 
age: Provided,  that  any  person  or  corporation  constructing 
such  crossing  or  operating  such  transmission  line  on  or  along 
such  county  road  or  county  street  shall  be  liable  to  the  county 
for  all  necessary  expense  incurred  in  restoring  such  county 
road  or  county  street  to  a  suitable  condition  for  travel. 
[Laws  1903,  §  1,  p.  360.] 

General  authority  to  amend  city  charter  does  not  authorize  amendment 
overriding  statute  on  special  subject.  (Benton  v.  Seattle  Electric  Co., 
50  Wash.  157,  96  Pac.  1033.) 

§  508.    May  Lease  or  Purchase  Property  of  Other  Corpora- 
tions. 

[§  4973,  Rem.-Bal.]  Any  corporation  incorporated  or  that 
may  hereafter  be  incorporated  under  the  laws  of  this  state  or 
any  state  or  territory  of  the  United  States,  for  the  purpose  of 
manufacturing,  transmitting  or  selling  electric  power,  may 
lease  or  purchase  and  operate  (except  in  cases  where  such 
lease  or  purchase  is  prohibited  by  the  constitution  of  this 
state)  the  whole  or  any  part  of  the  plant  for  manufacturing  or 
distributing  electric  power  or  energy  of  any  other  corporation, 
heretofore  or  hereafter  constructed,  together  with  the  fran- 
chises, powers,  immunities  and  all  other  property  or  appurte- 
nances appertaining  thereto :  Provided,  that  such  lease  or 
purchase  has  been  or  shall  be  consented  to  by  stockholders  of 
record  holding  at  least  two-thirds  in  amount  of  the  capital 
stock  of  the  lessor  or  grantor  corporation ;  and  all  such  leases 
and  purchases  heretofore  made  or  entered  into  by  consent  of 
stockholders  as  aforesaid  are  for  all  intents  and  purposes 
hereby  ratified  and  confirmed,  saving,  however,  any  vested 
rights  of  private  parties.  [Laws  1903,  §  3,  p.  362.] 
23 


§  510  EXISTING  CORPORATION  LAWS,  1913.  354 


HIGHWAY  AND  GRADE  CROSSINGS. 

§  510.     Definitions. 

The  term  "commission,"  when  used  in  this  act,  means  the 
Public  Service  Commission  of  Washington. 

The  term  "highway,"  when  used  in  this  act,  includes  all 
state  and  county  roads,  streets,  alleys,  avenues,  boulevards, 
parkways,  and  other  public  places  actually  open  and  in  use, 
or  to  be  opened  and  used,  for  travel  by  the  public. 

The  term  "railroad,"  when  used  in  this  act,  means  every 
railroad,  including  interurban  and  suburban  electric  rail- 
roads, by  whatsoever  power  operated,  for  the  public  use  in 
the  conveyance  of  persons  or  property  for  hire,  with  all 
bridges,  ferries,  tunnels,  equipment,  switches,  spurs,  sidings, 
tracks,  stations  and  terminal  facilities  of  every  kind,  used, 
operated,  controlled,  managed,  or  owned  by  or  in  connec- 
tion therewith.  The  said  term  shall  also  include  every  log- 
ging and  other  industrial  railway  owned  or  operated  pri- 
marily for  the  purpose  of  carrying  the  property  of  its  owners 
or  operators  or  of  a  limited  class  of  persons,  with  all  tracks, 
spurs  and  sidings  used  in  connection  therewith.  The  said 
term  shall  not  include  street  railways  operating  within  the 
limits  of  any  incorporated  city  or  town. 

The  term  "railroad  company,"  when  used  in  this  act,  in- 
cludes every  corporation,  company,  association,  joint  stock 
association,  partnership  or  person,  its,  their  or  his  lessees, 
trustees  or  receivers  appointed  by  any  court  whatsoever, 
owning,  operating,  controlling  or  managing  any  railroad,  as 
that  term  is  defined  in  this  section. 

The  term  "over-crossing,"  when  used  in  this  act,  means 
any  point  or  place  where  a  highway  crosses  a  railroad  by 
passing  above  the  same. 

The  term  "under-crossing,"  when  used  in  this  act,  means 
any  point  or  place  where  a  highway  crosses  a  railroad  by 
passing  under  the  same. 

The  term  "over-crossing"  or  "under-crossing,"  shall  also 
mean  any  point  or  place  where  one  railroad  crosses  another 
railroad  not  at  grade. 


355  HIGHWAY  AND  GRADE   CROSSINGS.       §§  510a,  510b 

The  term  "grade  crossing,"  when  used  in  this  act,  means 
any  point  or  place  where  a  railroad  crosses  a  highway  or  a 
highway  crosses  a  railroad  or  one  railroad  crosses  another, 
at  a  common  grade.     [Laws  1913,  c.  30,  §  1.] 

§  510a.     Grade  Crossing  Prohibited. 

All  railroads  and  extensions  of  railroads  hereafter  con- 
structed shall  cross  existing  railroads  and  highways  by  pass- 
ing either  over  or  under  the  same,  when  practicable,  and 
shall  in  no  instance  cross  any  railroad  or  highway  at  grade 
without  authority  first  being  obtained  from  the  commission 
to  do  so.  All  highways  and  extensions  of  highways  here- 
after laid  out  and  constructed  shall  cross  existing  railroads 
by  passing  either  over  or  under  the  same,  when  practicable, 
and  shall  in  no  instance  cross  any  railroad  at  grade  without 
authority  first  being  obtained  from  the  commission  to  do  so : 
Provided,  that  this  section  shall  not  be  construed  to  pro- 
hibit a  railroad  company  from  constructing  tracks  at  grades 
across  other  tracks  owned  or  operated  by  it  within  estab- 
lished yard  limits.  In  determining  whether  a  separation  of 
grades  is  practicable,  the  commission  shall  take  into  consid- 
eration the  amount  and  character  of  travel  on  the  railroad 
and  on  the  highway ;  the  grade  and  alignment  of  the  rail- 
road and  the  highway ;  the  cost  of  separating  grades ;  the 
topography  of  the  country,  and  all  other  circumstances  and 
conditions  naturally  involved  in  such  an  inquiry.  [Laws 
1913,  c.  30,  §  2.] 

§  510b.     Petitions  for  New  Crossings. 

Whenever  any  railroad  company  desires  to  cross  any  high- 
way or  railroad  at  grade,  it  shall  file  a  written  petition  with 
the  commission  setting  forth  the  reasons  why  the  crossing 
cannot  be  made  either  above  or  below  grade,  and  whenever 
the  county  commissioners  of  any  county,  or  the  municipal 
authorities  of  any  city  or  town,  or  the  state  officers  author- 
ized to  lay  out  and  construct  state  roads,  desire  to  lay  out 
or  extend  any  highway  across  any  railroad  at  grade,  they 
shall  file  a  written  petition  with  the  commission,  setting 
forth  the  reasons  why  the  crossing  cannot  be  made  either 


§  510b  EXISTING  CORPORATION  LAWS,  1913.  356 

above  or  below  grade.  Upon  receiving  such  petition  the 
commission  shall  immediately  investigate  the  same,  giving 
at  least  ten  days'  notice  to  the  railroad  company  or  com- 
panies and  the  county  or  municipality  affected  thereby,  of 
the  time  and  place  of  such  investigation,  to  the  end  that 
all  parties  interested  may  be  present  and  be  heard.  If  the 
highway  involved  is  a  state  road,  the  state  highway  commis- 
sioner shall  be  notified  of  the  time  and  place  of  hearing. 
The  evidence  introduced  shall  be  reduced  to  writing  and  be 
filed  by  the  commission.  If  the  commission  finds  that  it  is 
not  practicable  to  cross  the  railroad  or  highway  either  above 
or  below  grade,  it  shall  make  and  file  a  written  order  in  the 
cause,  granting  the  right  and  privilege  to  construct  a  grade 
crossing.  The  commission,  in  its  discretion,  may  provide  in 
the  order  authorizing  the  construction  of  a  grade  crossing, 
or  at  any  subsequent  time,  that  the  railroad  company  shall 
install  and  maintain  proper  signals,  warnings,  flagmen,  in- 
terlocking devices,  or  other  devices  or  means  to  secure  the 
safety  of  the  public  and  its  employees.  If  upon  investiga- 
tion the  commission  shall  find  that  it  is  impracticable  to 
construct  an  over-crossing  or  under-crossing  on  the  estab- 
lished or  proposed  highway,  arid  shall  find  that  by  deflect- 
ing the  established  or  proposed  highway  a  practicable  and 
feasible  over-crossing  or  under-crossing  or  a  safer  grade 
crossing  can  be  provided,  it  shall  continue  the  hearing  on. 
the  petition  "and  hold  a  supplemental  hearing  thereon.  At 
least  ten  days'  notice  of  the  time  and  place  of  such  supple- 
mental hearing  shall  be  given  to  all  land  owners  that  may 
be  affected  by  the  proposed  change  in  location  of  the  high- 
way. At  such  supplemental  hearing  the  commission  shall 
inquire  into  the  propriety,  advisability  and  neeessity  of 
changing  and  deflecting  the  highway  as  proposed  for  the 
purpose  of  securing  an  over-crossing,  under-crossing,  or  safer 
grade  crossing.  If  the  proposed  change  in  route  of  the  high- 
way involves  the  abandonment  and  vacation  of  a  portion  of 
an  established  highway,  the  owners  of  land  contiguous  to 
the  portion  of  the  highway  to  be  vacated  and  abandoned 
shall,  in  like  manner,  be  notified  of  the  time  and  place  of  the 
supplemental  hearing.     At  the  conclusion  of  the  hearing  on 


357  HIGHWAY  AND  GRADE  CROSSINGS.  §  blOc 

the  petition,  the  commission  shall  make  and  file  its  findings 
of  fact  in  writing  concerning  the  matters  inquired  into,  and 
shall  determine  the  location  of  the  crossing  which  may  be 
constructed,  and  whether  the  same  shall  be  an  under-cross- 
ing, over-crossing,  or  grade  crossing,  and  shall  determine 
whether  or  not  any  proposed  change  in  the  route  of  an  exist- 
ing highway,  or  the  abandonment  of  a  portion  thereof  is 
advisable  or  necessary  to  secure  an  over-crossing,  under- 
crossing,  or  safer  grade  crossing.  If  the  commission  shall 
find  and  determine  that  a  change  in  route  of  an  existing 
highway,  or  abandonment  and  vacation  of  a  portion  thereof 
is  necessary  or  advisable,  it  shall  further  find  and  determine 
what  private  lands,  property,  or  property  rights,  if  any,  it 
is  necessary  to  take,  damage,  or  injuriously  afl'ect,  for  the 
purpose  of  laying  out  and  constructing  the  highway  along 
a  new  route,  and  what  private  lands,  property,  or  property 
rights,  if  any,  will  be  affected  by  the  proposed  abandonment 
and  vacation  of  a  portion  of  an  existing  highway.  The 
lands,  property,  and  property  rights  found  necessary  to  be 
taken,  damaged,  or  affected  shall  be  described  in  said  find- 
ings with  reasonable  accuracy,  and  the  right  to  take,  dam- 
age or  injuriously  affect  the  same  shall  be  acquired  as  here- 
inafter provided.  In  any  action  brought  to  acquire  the  right 
to  take,  damage,  or  injuriously  affect  any  such  lands,  prop- 
erty, or  property  rights,  the  findings  of  the  commission  shall 
be  conclusive  as  to  the  necessity  for  taking,  damaging,  or 
injuriously  affecting  the  same.  A  copy  of  said  findings  shall 
be  served  upon  all  parties  to  the  cause.  [Laws  1913,  c.  30, 
§3.J 

§  510c.    Petitions  for  Change  in  Existing  Crossings. 

The  mayor  and  city  council,  or  other  governing  body  of 
any  city  or  town,  or  the  county  commissioners  of  any  county 
within  which  any  highway  is  crossed  by  any  railroad,  or 
any  railroad  company  whose  road  is  crossed  by  any  highway, 
may  file  with  the  commission  their  or  its  petition  in  writing, 
alleging  that  the  public  safety  requires  an  alteration  in  the 
method  and  manner  of  such  crossing,  and  its  approaches, 
the  location  of  the  highway  or  crossing,  the  closing  or  dis- 


§  510c  EXISTING  CORPORATION   LAWS,   1913.  358 

continuance  of  an  existing  highway  crossing,  and  the  diver- 
sion of  travel  thereon  to  another  highway  or  crossing  or  if 
not  practicable  to  change  such  crossing  from  grade  or  to 
close  and  discontinue  the  same,  the  opening  of  an  additional 
crossing  for  the  partial  diversion  of  travel  and  praying  that 
the  same  may  be  ordered.     Upon  such  petition  being  filed, 
the  commission  shall  fix  a  time  and  place  for  hearing  the 
petition  and  shall  give  not  less  than  ten  days'  notice  thereof 
to  the  petitioner,  the  railroad  company  and  the  municipality 
or  county  in  which  the  crossing  is  situate.     If  the  highway 
involved  is  a  state  highway,  like  notice  shall  be  given  to  the 
state  highway  commissioner.     If  the  change  petitioned  for 
requires  that  private  lands,  property,  or  property  rights  be 
taken,  damaged,  or  injuriously  affected  to  open  up  a  new 
route  for  the  highway,  or  requires  that  any  portion  of  any 
existing  highway  be  vacated  and  abandoned,  ten  days'  notice 
of  the  hearing  shall  be  given  to  the  owner  or  owners  of  the 
private   lands,   property,   and   property  rights  which   it  is 
necessary  to  take,  damage  or  injuriously  affect,  and  to  the 
owner  or  owners  of  the  private  lands,  property,  or  property 
rights  that  will  be  affected  by  the  proposed  vacation  and 
abandonment    of    the    existing   highway.     The    commission 
shall  also  cause  said  notice  of  hearing  to  be  published  once 
in  some  newspaper  of  general  circulation  in  the  community 
where  such  crossing  is  situate,  which  publication  shall  appear 
at  least  two  days  prior  to  the  date  of  hearing.     At  the  time 
and  place  fixed  in  the  notice,  all  persons  and  parties  inter- 
ested shall  be  entitled  to  be  heard  and  introduce  evidence. 
At  the  conclusion  of  the  hearing  the  commission  shall  make 
and  file  its  written  findings  of  fact  concerning  the  matters 
inquired  into  in  like  manner  as  provided  in  the  preceding 
section  for  findings  of  fact  upon  petition  for  new  crossings. 
The  commission  shall  also  enter  its  order  based  upon  said 
findings  of  fact,  which  shall  specify  whether  the  highway 
shall  continue  at  grade  or  whether  it  shall  be  changed  to 
cross  over  or  under  the  railroad  or  whether  said  highway 
shall  be  closed  and  travel  thereon  diverted  to  another  chan- 
nel, or  any  other  change  that  the  commission  may  find  advis- 
able or  necessary.     In  case  the  order  made  requires  that 


359      .  HIGHWAY   AND  GRADE  CROSSINGS.       §§  510d,  510e 

private  lands,  property,  or  property  rights  be  taken,  dam- 
aged, or  injuriously  affected,  the  right  to  take,  damage,  or 
injuriously  affect  the  same  shall  be  acquired  as  hereinafter 
provided. 

Petition  for  the  change  in  any  existing  grade  crossing,  or 
for  the  elimination  thereof,  may  be  filed  by  the  commission 
on  its  own  motion,  and  proceedings  thereon  shall  be  the 
same  as  herein  provided  for  the  hearing  and  determination 
of  a  petition  filed  by  a  railroad  company.  [Laws  1913,  c.  30, 
§4.] 

§  510d.    Duty  to  Maintain  Crossings. 

When  a  highway  crosses  a  railroad  by  an  over-crossing 
or  under-crossing,  the  framework  and  abutments  of  the 
over-crossing  or  under-crossing,  as  the  case  may  be,  shall 
be  maintained  and  kept  in  repair  by  the  railroad  company, 
and  the  roadway  thereover  or  thereunder  and  approaches 
thereto  shall  be  maintained  and  kept  in  repair  by  the  county 
or  municipality  in  which  the  same  are  situated,  or  if  the 
highw^ay  is  a  state  road,  the  roadway  over  or  under  the 
railroad  shall  be  maintained  and  kept  in  repair  as  provided 
by  law  for  the  maintenance  and  repair  of  state  roads :  Pro- 
vided, however,  that  this  section  shall  not  apply  to  over- 
crossings  or  under-crossings  constructed  prior  to  the  pas- 
sage of  this  act  under  special  contracts  between  a  railroad 
company  and  any  county,  municipality,  or  the  state,  in  which 
different  provisions  is  made  for  the  maintenance  and  repair 
of  the  under-crossing  or  over-crossing.  [Laws  1913,  c.  30, 
§5.] 

§  510s.    Apportionment  of  Cost  of  CrossingfS. 

Subdivision  A. 
Whenever,  under  the  provisions  of  this  act,  new  railroads 
are  constructed  across  existing  highways,  or  highway  changes 
are  made  either  for  the  purpose  of  avoiding  grade  crossings 
on  such  new  railroads,  or  for  the  purpose  of  crossing  at  a 
safer  and  more  acce.ssible  point  than  otherwise  available,  the 
entire  expense  of  crossing  above  or  below  the  grade  of  the 


§  510e  EXISTING  CORPORATION  LAWS,   1913.  3G0 

existing  highway,  or  changing  the  route  thereof,  for  the  pur- 
pose mentioned  in  this  subdivision,  shall  be  paid  by  the  rail- 
road company. 

Subdivision  B. 
Whenever,  under  the  provisions  of  this  act,  a  new  highway 
is  constructed  across  a  railroad,  or  an  existing  grade  crossing 
is  eliminated  or  changed,  the  entire  expense  of  constructing 
an  over-crossing,  under-crossing,  or  safer  grade  crossing,  as 
the  case  may  be,  shall  be  apportioned  by  the  commission  be- 
tween the  railroad,  municipality  or  county  affected,  or  if  the 
highway  is  a  state  road,  between  the  railroad  and  the  state,  as 
justice  may  require,  regard  being  had  for  the  benefits  accruing 
to  the  railroad,  municipality,  county,  or  state  by  reason  of 
the  improvement.  If  the  highway  involved  is  a  state  road, 
the  amount  not  apportioned  to  the  railroad  company  shall  be 
paid  as  provided  by  law  for  constructing  such  state  road. 
When  an  existing  grade  crossing  is  ordered  eliminated  by  the 
construction  of  an  over-crossing  or  under-crossing,  the  com- 
mission may  in  its  discretion  pay  an  amount  not  to  exceed  ten 
per  cent  of  the  cost  thereof  out  of  the  appropriation  provided 
in  this  act,  and  in  such  cases  the  state  auditor  is  hereby  au- 
thorized and  required  upon  the  requisition  of  the  commission, 
to  draw  warrants  on  the  state  treasury  payable  to  the  party 
designated  by  the  commission  for  such  amount,  and  the  state 
treasurer  is  hereby  authorized  and  required  to  pay  such  war- 
rants on  presentation. 

Subdivision  C. 

Whenever  two  or  more  lines  of  railroad  owned  or  operated 
by  different  companies  cross  a  highway,  or  each  other,  by  an 
over-crossing,  under-crossing  or  grade  crossing  required  or 
permitted  by  this  act  or  by  an  order  of  the  commission,  the 
portion  of  the  expense  of  making  such  crossing  not  chargeable 
to  any  municipality,  county,  or  to  the  state,  shall  be  appor- 
tioned between  said  railroad  companies  by  the  commission 
unless  said  companies  shall  mutually  agree  upon  an  apportion- 
ment. If  it  becomes  necessary  for  the  commission  to  make  an 
apportionment  between  the  railroad  companies,  a  hearing  for 
that  purpose  shall  be  held,  at  least  ten  days'  notice  of  which 
shall  be  given.     [Laws  1913,  c.  30,  §  6.] 


361  HIGHWAY  AND  GRADE  CROSSINGS.  §  510f 

§  510f.    Payment  of    Costs    and  Apportionment  of    Con- 
struction Work. 

In  the  construction  of  new  railroads  across  existing  high- 
ways, the  railroads  shall  do  or  cause  to  be  done  all  the  work 
of  constructing  the  crossings  and  road  changes  that  may  be 
required,  and  shall  acquire  and  furnish  whatever  property  or 
easements  may  be  necessary,  and  shall  pay,  as  provided  in 
the  preceding  section,  the  entire  expense  of  such  work  includ- 
ing all  compensation  or  damages  for  property  or  property 
rights  taken,  damaged  or  injuriously  affected.  In  all  other 
cases  the  construction  work  may  be  apportioned  by  the  com- 
mission between  the  parties  who  may  be  required  to  contribute 
to  the  cost  thereof  as  the  parties  may  agree,  or  as  the  com- 
mission may  consider  advisable.  All  work  within  the  limits 
of  railroad  rights  of  way  shall  in  every  case  be  done  by  the 
railroad  company  owning  or  operating  the  same.  The  cost  of 
acquiring  additional  lands,  rights  or  easements  to  provide  for 
the  change  of  existing  crossings  shall,  unless  the  parties  other- 
wise agree,  in  the  first  instance  be  paid  by  the  municipality 
or  county  within  which  the  crossing  is  located ;  or  in  the  case 
of  a  state  road,  shall  be  paid  in  the  manner  provided  by  law 
for  paying  the  cost  of  acquiring  lands,  rights  or  easements  for 
the  construction  of  state  roads.  The  expense  accruing  on 
account  of  property  taken  or  damaged  shall  be  divided  and 
paid  in  the  manner  provided  for  dividing  and  paying  other 
costs  of  construction.  Upon  the  completion  of  the  work  and 
its  approval  by  the  commission,  an  accounting  shall  be  had, 
and  if  it  shall  appear  that  any  party  has  expended  more  than 
its  proportion  of  the  total  cost,  a  settlement  shall  be  forth- 
with made.  If  the  parties  shall  be  unable  to  agree  upon  a 
settlement,  the  commission  shall  arbitrate,  adjust  and  settle 
the  account  after  notice  to  the  parties.  In  the  event  of  fail- 
ure and  refusal  of  any  party  to  pay  its  proportion  of  the 
expense,  the  sum  with  interest  from  the  date  of  the  settlement 
may  be  recovered  in  a  civil  action  by  the  party  entitled 
thereto.  In  cases  where  the  commission  has  settled  the  ac- 
count, the  finding  of  the  commission  as  to  the  amount  due 
shall  be  conclusive  in  any  civil  action  brought  to  recover  the 
same  if  such  finding  has  not  been  reviewed  or  appealed  from 


§§  510g-510i      EXISTING  CORPORATION  LAWS,  1913.  362 

as  herein  provided,  and  the  time  for  review  or  appeal  has 
expired.  If  any  party  shall  review  or  appeal  from  any  find- 
ings or  order  of  the  commission  apportioning  the  cost  between 
the  parties  liable  therefor,  the  superior  court  or  the  supreme 
court,  as  the  case  may  be,  shall  cause  judgment  to  be  entered 
in  such  review  proceedings  for  such  sum  or  sums  as  may  be 
found  lawfully  or  justly  due  by  one  party  to  another.  [Laws 
1913,  c.  30,  §  7.] 

§  510g.     Plans  and  Specifications — Proposals. 

Plans  and  specifications  of  changes  in  existing  crossings 
proposed  under  this  act,  and  an  estimate  of  the  expense 
thereof,  shall  be  submitted  to  the  commission  for  its  approval 
before  the  commencement  of  the  work.  In  case  the  work  is 
to  be  done  by  contract,  the  proposals  of  the  contractor  shall 
be  submitted  to  the  commission  and  if  it  shall  determine  that 
the  bids  are  excessive  it  shall  have  power  to  require  the  sub- 
mission of  new  proposals.     [Laws  1913,  c.  30,  §  8.] 

§  510h.     Temporary  Crossings. 

The  commission,  in  ifs  discretion,  good  cause  appearing 
therefor,  and  upon  such  conditions  as  it  may  prescribe,  shall 
have  power,  without  notice  or  hearing,  to  grant  a  permit  to 
construct  and  maintain  a  temporary  grade  crossing  for  a 
period  not  exceeding  six  months,  and  may  revoke  such  permit 
at  any  time:  Provided,  that  nothing  contained  in  this  sec- 
tion shall  be  construed  to  prohibit  the  commission,  after  notice 
and  investigation,  from  permitting  the  maintenance  of  a  tem- 
porary grade  crossing  for  a  longer  period  than  six  months. 
Any  order  granting,  refusing  to  grant,  or  revoking  a  permit 
for  a  temporary  grade  crossing  shall  not  be  reviewable. 
[Laws  1913,  c.  30,  §  9.] 

§  5101.     The  Commission  may  Fix  Time. 

The  commission,  in  any  order  requiring  work  to  be  done, 
shall  have  power  to  fix  the  time  within  which  the  same  shall 
be  performed  and  completed:  Provided,  that  if  any  party 
having  a  duty  to  perform  within  a  fixed  time  under  any  order 
of  the  commission  shall    make  it  appear  to  the  commission 


4 


363  HIGHWAY   AND  GRADE   CROSSINGS.       §§510j,  510k 

that  the  order  cannot  reasonably  be  complied  with  within  the 
time  fixed  by  reason  either  of  facts  arising  after  the  entry 
of  the  order  or  of  facts  existing  prior  to  the  entry  thereof 
that  were  not  presented,  and  with  reasonable  diligence  could 
not  have  been  sooner  presented  to  the  commission,  such  party 
shall  be  entitled  to  a  reasonable  extension  of  time  within  which 
to  perform  the  work.  An  order  of  the  commission  refusing 
to  grant  an  extension  of  time  may  be  reviewed  as  provided 
for  the  review  of  other  orders  of  the  commission.  [Laws 
1913,  c.  30,  §  10.] 

§  510j.     Practice  and  Procedure  Before  Commission. 

Modes  of  procedure  under  this  act,  unless  herein  otherwise 
provided,  shall  be  as  provided  in  The  Public  Service  Commis- 
sion law,  being  chapter  117,  of  the  Laws  of  1911  for  pro- 
cedure under  that  act.  The  commission  is  hereby  given  power 
to  adopt  rules  to  govern  its  proceedings  and  to  regulate  the 
mode  and  manner  of  all  investigations  and  hearings  under 
this  act.     [Laws  1913,  c.  30,  §  11.] 

§  510k.    Notices — Form  and  Manner  of  Service. 

All  notices  required  to  be  served  by  this  act  shall  be  in 
writing,  and  shall  briefly  state  the  nature  of  the  matter  to 
be  inquired  into  and  investigated.  Notices  may  be  served  in 
the  manner  provided  by  law  for  the  service  of  summons  in 
civil  cases,  or  by  registered  United  States  mail.  When  ser- 
vice is  made  by  registered  mail,  the  receipt  of  the  receiving 
postoffice  shall  be  sufficient  proof  of  service.  "When,  under 
the  provisions  of  this  act,  it  is  necessary  to  serve  notice  of 
hearing  before  the  commission  on  owners  of  private  lands, 
property,  or  property  rights,  and  such  owners  cannot  be 
found,  service  may  be  made  by  publication  in  the  manner 
provided  by  law  for  the  publication  of  summons  in  civil  ac- 
tions, except  that  publication  need  be  made  but  once  each 
week  for  three  consecutive  weeks,  and  the  hearings  may  be 
held  at  any  time  after  the  expiration  of  thirty  days  from 
the  date  of  the  first  publication  of  the  notice.  [Laws  1913, 
c.  30,  §  12.] 


§§  5101-510n      EXISTING  CORPORATION  LAWS,  1913.  36-1 

§  510 1.    Review  and  Appeal. 

Upon  the  petition  of  any  party  to  a  proceeding  before  the 
commission,  any  finding  or  findings,  or  order  or  orders  of  the 
commission,  made  under  color  of  authority  of  this  act,  except 
as  otherwise  provided  in  section  9  [§  510h,  ante],  may  be  re- 
viewed in  the  superior  court  of  the  county  in  which  the  crossing 
is  located  and  the  reasonableness  and  lawfulness  of  such  finding 
or  findings,  order  or  orders  inquired  into  and  determined,  as 
provided  in  the  Public  Service  Commission  Law  (Laws  1911, 
c.  117),  for  the  review  of  findings  and  orders  made  under 
that  act.  An  appeal  may  be  taken  to  the  supreme  court  from 
the  judgment  of  the  superior  court  in  like  manner  as  provided 
in  said  public  service  commission  law  for  appeals  to  the 
supreme  court.     [Laws  1913,  c.  30,  §  13.] 

§  510m.    Employment  of  Engineers  and  Other  Employees. 

The  commission  may  employ  temporarily  such  experts,  en- 
gineers, and  inspectors  as  may  be  necessary  to  supervise 
changes  in  existing  crossings  undertaken  under  this  act;  the 
expense  thereof  shall  be  paid  by  the  railroad  upon  the  request 
and  certificate  of  the  commission,  said  expense  to  be  included 
in  the  cost  of  the  particular  change  of  grade  on  account  of 
which  it  is  incurred,  and  apportioned  as  provided  in  this  act. 

The  commission  may  also  employ  such  engineers  and  other 
persons  as  permanent  employees  as  may  be  necessary  to  prop- 
erly administer  this  act,  and  the  expense  thereof  shall  be  paid 
out  of  the  appropriation  herein  provided.  [Laws  1913,  c.  30, 
§14.] 

§  510n.    Eminent  Domain. 

Whenever  to  carry  out  any  work  undertaken  under  this 
act  it  is  necessary  to  take,  damage,  or  injuriously  afi:ect  any 
private  lands,  property,  or  property  rights,  the  right  so  to 
take,  damage,  or  injuriously  affect  the  same  may  be  acquired 
Dy  condemnation  as  hereinafter  provided. 

Subdivision  A. 
In  cases  where  new  railroads  are  constructed  and  laid  out 
by  railroad  company  authorized  to  exercise  the  power  of  emi- 


I 


I 


365  HIGHWAY  AND  GRADE  CROSSINGS.  §  510n 

nent  domain,  the  right  to  take,  damage,  or  injuriously  affect 
private  lands,  property,  or  property  rights  shall  be  acquired 
by  the  railroad  company  by  a  condemnation  proceedings 
brought  in  its  own  name  and  prosecuted  as  provided  by  law 
for  the  exercise  of  the  power  of  eminent  domain  by  railroad 
companies,  and  the  right  of  eminent  domain  is  hereby  con- 
ferred on  railroad  companies  for  the  purpose  of  carrying  out 
the  requirements  of  this  act  or  the  requirements  of  any  order 
of  the  commission. 

Subdivision  B. 

In  cases  where  it  is  necessary  to  take,  damage,  or  injuriously 
affect  private  lands,  property,  or  property  rights  to  permit  the 
opening  of  a  new  highway  or  highway  crossing  across  a  rail- 
road, the  right  to  take,  damage,  or  injuriously  affect  such 
lands,  property,  or  property  rights  shall  be  acquired  by  the 
municipality  or  county  petitioning  for  such  new  crossing  by  a 
condemnation  proceeding  brought  in  the  name  of  such  munici- 
pality or  county  as  provided  by  law  for  the  exercise  of  the 
power  of  eminent  domain  by  such  municipality  or  county.  If 
the  highway  involved  be  a  state  highway,  then  the  right  to 
take,  damage,  or  injuriously  affect  private  lands,  property, 
or  property  rights  shall  be  acquired  by  a  condemnation  pro- 
ceeding prosecuted  under  the  laws  relative  to  the  exercise  of 
the  power  of  eminent  domain  in  aid  of  such  state  road. 

Subdivision  C. 
In  cases  where  the  commission  orders  changes  in  existing 
crossings  to  secure  an  under-crossing,  over-crossing,  or  safer 
grade  crossing,  and  it  is  necessary  to  take,  damage,  or  injuri- 
ously affect  private  lands,  property,  or  property  rights  to 
execute  the  work,  the  right  to  take,  damage,  or  injuriously 
affect  such  lands,  property,  or  property  rights  shall  be  ac- 
quired in  a  condemnation  proceeding  prosecuted  in  the  name 
of  the  state  of  Washington  by  the  attorney  general  under 
the  laws  relating  to  the  exercise  of  the  power  of  eminent 
domain  by  cities  of  the  first  class  for  street  and  highway  pur- 
poses: Provided,  however,  that  in  the  cases  mentioned  in  this 
subdivision  the  full  value  of  any  lands  taken  shall  be  awarded, 
together  with  damages,  if  any  accruing  to  the  remainder  of 


§§  510o-510q      EXISTING  CORPORATION  LAWS,  1913.  366 

the  land  not  taken  by  reason  of  the  severance  of  the  part 
taken,  but  in  computing  the  damages  to  the  remainder,  if 
any^  the  jury  shall  offset  against  such  damages,  if  any,  the 
special  benefits,  if  any,  accruing  to  such  remainder  by  reason 
of  the  proposed  improvement.  The  right  of  eminent  domain 
for  the  purposes  mentioned  in  this  subdivision  is  hereby 
granted.     [Laws  1913,  c.  30,  §  15.] 

§  51  Oo.  Illegal  Crossings  may  be  Enjoined  or  Abated  as 
Nuisances. 
If  an  under-crossing,  over-crossing,  or  grade  crossing  is  con- 
structed, maintained,  or  operated,  or  is  about  to  be  constructed, 
operated,  or  maintained,  in  violation  of  the  provisions  of  this 
act,  or  in  violation  of  any  order  of  the  commission,  such  con- 
struction, operation,  or  maintenance  may  be  enjoined,  or  may 
be  abated,  as  provided  by  law  for  the  abatement  of  nuisances. 
Suits  to  enjoin  or  abate  may  be  brought  by  the  attorney  gen- 
eral, or  by  the  prosecuting  attorney  of  the  county  in  which 
the  unauthorized  crossing  is  located.     [Laws  1913,  c.  30,  §  16.] 

§  51  Op.    Mandamus. 

If  any  railroad  company,  county,  municipality,  or  officers 
thereof,  or  other  person,  shall  fail,  neglect,  or  refuse  to  per- 
form or  discharge  any  duty  required  of  it  or  them  under  this 
act  or  any  order  of  the  commission,  the  performance  of  such 
duty  may  be  compelled  by  mandamus,  or  other  appropriate 
proceeding,  prosecuted  by  the  attorney  general  upon  the  re- 
quest of  the  commission.     [Laws  1913,  c.  30,  §  17.] 

§  510q.    Penalty  for  Violation  by  Railroad. 

If  any  railroad  company  shall  fail  or  neglect  to  obey,  com- 
ply with,  or  carry  out  the  requirements  of  this  act,  or  any 
order  of  the  commission  made  under  it,  such  company  shall 
be  liable  to  a  penalty  not  to  exceed  $5,000.00,  such  penalty 
to  be  recovered  in  a  civil  action  brought  in  the  name  of  the 
state  of  Washington  by  the  attorney  general.  All  penalties 
recovered  shall  be  paid  into  the  state  treasury.  [Laws  1913, 
c.  30,  §  18.] 


1 


3C7  HIGHWAY   AND   GRADE   CROSSINGS.       §§  510s-510w 

§  510s.  Erection  and  Maintenance  of  Posts,  Piers  and  Abut- 
ments in  Highways. 
"Whenever,  to  carry  out  any  work  ordered  under  this  act,  it 
is  necessary  to  erect  and  maintain  posts,  piers,  or  abutments 
in  a  highway,  the  right  and  authority  to  erect  and  maintain 
the  same  is  hereby  granted.     [Laws  1913,  c.  30,  §  19.] 

§  510t.    No  New  Right  of  Action  Conferred. 

Nothing  contained  in  this  act  shall  be  construed  as  confer- 
ring a  right  of  action  for  the  abandonment  or  vacation  of  any 
existing  highway  or  portion  thereof  in  cases  where  no  right 
of  action  exists  independent  of  this  act.  [Laws  1913,  c.  30, 
§20.] 

§  510u.    Act  When  not  Operative. 

This  act  shall  not  be  operative  within  the  limits  of  cities 
authorized  to  frame  their  own  charters,  and  it  shall  not  be 
construed  to  apply  to  street  railway  lines  operating  in,  on, 
through,  along,  over,  or  across  any  street,  alley  or  other  public 
place  within  the  limits  of  any  incorporated  city  or  town,  ex- 
cept that  no  street-car  line  outside  of  cities  authorized  to 
frame  their  own  charters  shall  cross  a  railroad  at  grade  with- 
out express  authority  from  the  commission.  [Laws  1910,  c. 
30,  §  21.] 

§  510v.     Constitutionality. 

If  any  section,  subdivision,  sentence,  or  clause  of  this  act 
is  for  any  reason  held  to  be  unconditional,  such  decision  shall 
not  affect  the  validity  of  the  remaining  portions  of  this  act. 
[Laws  1910,  c.  30,  §  22.] 

§  510w.     Repeal. 

Chapter  162  of  the  Laws  of  1909,  entitled,  "An  act  to  regu- 
late the  manner  in  which  railroads  shall  cross  highways  and 
other  railroads  and  the  manner  in  which  highways  shall  cross 
railroads  in  the  State  of  Washington,"  approved  March  17, 
1909,  and  all  other  acts  and  parts  of  acts  in  conflict  with  this 
act,  are  hereby  repealed :  Provided,  however,  that  proceed- 
ings on  applications  for  grade  crossings  pending  before  the 


§  510x  EXISTING  CORPORATION  LAWS,  1913.  368 

commission  at  the  time  this  act  takes  effect  may  be  concluded 
and  determined  under  existing  laws.     [Laws  1913,  c.  30,  §  23.] 

§  510x.    Appropriation. 

There  is  hereby  appropriated  out  of  the  general  fund  the 
sum  of  twenty-five  thousand  ($25,000.00)  dollars  or  so  much 
thereof  as  may  be  necessary  to  pay  the  cost  of  administering 
this  act  and  the  state's  proportion  of  the  cost  of  grade  sepa- 
ration made  under  the  provisions  of  this  act.  [Laws  1913, 
c.  30,  §  24.] 


I 


369  ELECTRIC  RAILWAY  COMPANIES.  §  511 


ELECTRIC  RAILWAY  COMPANIES. 

§  511.     Authority    to    Construct  —  How    and    by    Whom 
Granted. 

[§  9080,  Rem.-Bal.]  The  legislative  authority  of  the  city 
or  town  having  control  of  any  public  street  or  road,  or  where 
such  street  or  road  is  not  within  the  limits  of  any  incorporated 
city  or  town,  then  the  board  of  county  commissioners  wherein 
such  road  or  street  is  situated,  may  grant  authority  for  the  con- 
struction, maintenance  and  operation  of  electric  railroads  or 
railways,  motor  railroads  or  railways  and  railroads  and  rail- 
ways of  which  the  motive  power  is  any  power  other  than 
steam,  together  with  such  poles,  wires  and  other  appurtenances 
upon,  over,  along  and  across  any  such  public  street  or  road 
and  in  granting  such  authority  the  legislative  authority  of 
such  city  or  town  or  the  board  of  county  commissioners,  as 
the  case  may  be,  may  prescribe  the  terms  and  conditions  on 
which  such  railroads,  or  railways  and  their  appurtenances 
shall  be  constructed,  maintained  and  operated  upon,  over, 
along  and  across  such  road  or  street,  and  the  grade  or  eleva- 
tion at  which  the  same  shall  be  maintained  and  operated: 
Provided,  that  hereafter,  on  application  being  made  to  the 
board  of  county  commissioners  for  such  authority,  the  board 
shall  fix  a  time  and  place  for  hearing  the  same,  and  shall 
cause  the  county  auditor  to  give  public  notice  thereof  at  the 
expense  of  the  applicant,  by  posting  written  or  printed  no- 
tices in  three  public  places  in  the  county  seat  of  the  county, 
and  in  at  least  one  conspicuous  place  on  the  road  or  street  or 
part  thereof,  for  which  application  is  made,  at  least  thirty 
days  before  the  day  fixed  for  such  hearing,  and  by  publish- 
ing a  like  notice  three  times  in  some  daily  newspaper  pub- 
lished in  the  county,  or  if  no  daily  newspaper  is  published  in 
the  county,  then  the  newspaper  doing  the  county  printing, 
the  last  publication  to  be  at  least  five  days  before  the  day 
fixed  for  such  hearing,  which  notice  shall  state  the  name  or 
names  of  the  applicant  or  applicants,  a  description  of  the 

21 


§  511  EXISTING  CORPORATION   LAWS,    1913.  370 

roads  or  streets  or  parts  thereof  for  which  the  application  is 
made,  and  the  time  and  place  fixed  for  the  hearing.  Such 
hearing  may  be  adjourned  from  time  to  time  by  order  of  the 
board.  If,  after  such  hearing,  the  board  shall  deem  it  to  be 
for  the  public  interest  to  grant  such  authority  in  whole  or  in 
part,  the  board  may  make  and  enter  the  proper  order  grant- 
ing the  authority  applied  for  or  such  part  thereof  as  the 
board  deems  to  be  for  the  public  interest,  and  shall  require 
such  railroad  or  railway  and  its  appurtenances  to  be  placed 
in  such  location  on  or  along  the  road  or  street  as  the  board 
finds  will  cause  the  least  interference  with  other  uses  of  the 
road  or  street.  In  case  any  such  railroad  or  railway  is,  or 
shall  be  located  in  part  on  private  right  of  way,  the  owner 
thereof  shall  have  the  right  to  construct  and  operate  the  same 
across  any  county  road  or  county  street  which  intersects  such 
private  right  of  way,  if  such  crossing  is  so  constructed  and 
maintained  as  to  do  no  unnecessary  damage:  Provided,  that 
any  person  or  corporation  constructing  such  crossing  or  oper- 
ating such  railroad  or  railway  on  or  along  such  county  road  or 
public  street  shall  be  liable  to  the  county  for  all  necessary  ex- 
pense incurred  in  restoring  such  county  road  or  public  street 
to  a  suitable  condition  for  travel.     [Laws  1907,  §  1,  p.  192.] 

Street  railway  franchise  granted  by  mayor  and  counsel  valid  with- 
out vote  of  the  people.  (Benton  v.  Seattle  Elec.  Co.,  50  Wash.  156, 
96  Pac.  1033.) 

Laws  of  1907,  page  192,  supersedes  city  charter  of  Seattle,  requiring 
franchises  to  be  sold  at  public  auction  to  highest  bidder.  (Ewing  v. 
Seattle,  55  Wash.  229,  104  Pac.  259.) 

A  city,  in  granting  a  franchise  to  a  street  railway  company,  may  not 
devest  itself  of  its  police  power.  (Tacoma  v.  Boutelle,  61  Wash.  434, 
112  Pac.  661.) 

An  ordinance  requiring  a  street  railway  to  transport  passengers  to 
city  limits  and  give  transfers  for  one  fare  of  five  cents  is  operative  on 
territory  annexed  to  the  city.      (Peterson  v.   Tacoma   R.   &  Power   Co., 

60  Wash.  406,  111  Pac.  338.) 

An  ordinance  requiring  a  street-car  company  to  equip  its  cars  with 
fenders  is  reasonable  police  regulation.  (Tecker  v.  Seattle  Eenton  etc. 
R.  Co.,  60  Wash.  570,  111  Pac.  791.) 

A  clause  in  a  franchise  restricted  to  existing  street  railways  to  be 
acquired  does  not  apply  to  old  system.     (McGilvra  v.  Seattle  Elec.  Co., 

61  Wash.  38,  111  Pac.  896.) 


371  ELECTRIC  RAILWAY  COMPANIES.  §  512 

A  company's  franchise  requiring  the  giving  of  transfers  does  not 
compel  giving  transfers  on  competing  line,  the  capital  stock  of  which 
had  been  acquired  by  company  also  holding  the  stock  of  the  company 
whose  franchise  contained  said  requirement.  (State  ex  rel.  Tacoma  v. 
Tacoma  K.  etc.  Co.,  61  Wash.  507,  112  Pac.  506.) 

A  provision  in  a  franchise  requiring  two  trips  a  day  means  minimum 
service.     (Tacoma  v.  Boutelle,  61  Wash.  434,  112  Pac.  661.) 

A  franchise  authorizing  a  company  to  employ  either  electricity  or  cable 
power  authorizes  the  company  to  use  both  at  the  same  time.  (McGilvra 
V.  Seattle  Elec.  Co.,  61  Wash.  38,  111  Pac.  896.) 

§  512.  Eminent  Domain — May  Appropriate  Land  for  Right 
of  Way. 
[§  9081,  Rem.-Bal.]  Every  corporation  incorporated  or 
that  may  hereafter  be  incorporated  under  the  laws  of  this 
state,  or  of  any  other  state  or  territory  of  the  United  States 
and  doing  business  in  this  state  for  the  purpose  of  operating 
railroads  or  railways  by  electric  power,  shall  have  the  right 
to  appropriate  real  estate  and  other  property  for  right  of  way 
or  for  any  corporate  purpose,  in  the  same  manner  and  under 
the  same  procedure  as  now  is  or  may  hereafter  be  provided  by 
law  in  the  case  of  ordinary  railroad  corporations  authorized 
by  the  laws  of  this  state  to  exercise  the  right  of  eminent  do- 
main :  Provided,  that  such  right  of  eminent  domain  shall  not 
be  exercised  with  respect  to  any  public  road  or  street  until 
the  location  of  the  electric  railroad  or  railway  thereon  has 
been  authorized  in  accordance  with  section  1  of  this  act  [9080. 
Rem.-Bal.].     [Laws  1903,  §2,  p.  366.] 

A  company  may  condemn  land  in  accordance  with  its  special  charter 
or  subsequent  general  law.  (Cascades  R.  Co.  v.  Sohms,  1  Wash.  Ter. 
557.) 

Street  railway  public  use.  (State  ex  rel.  Harlan  v.  Centralia  Co., 
42  Wash.  632,  85  Pac.  344.) 

Street  railway  has  power  of  eminent  domain,  but  proceeding  to  de- 
termine damages  to  easements  of  light  and  air  by  construction  of  trestle 
roadway  on  dedicated  street  is  not  condemnation  of  the  street.  (State 
ex  rel.  Smith  v.  Superior  Court,  30  Wash.  219.) 

Street  railway  may  condemn  property  for  power  plant.  (State  ex 
rel.  Harlan  v.  Centralia  etc.  Co.,  42  Wash.  632.) 


§  513  EXISTING  CORPORATION  LAWS,   1913.  372 

§  513.    May  Lease  or  Purchase  Property  of  Other  Corpora- 
tions. 

[§  9082,  Rem.-Bal.]  Any  corporation  incorporated  or  that 
may  hereafter  be  incorporated  under  the  laws  of  this  state  or 
any  state  or  territory  of  the  United  States  for  the  purpose  of 
constructing,  owning  or  operating  railroads  or  railways  by 
electric  power,  may  lease  or  purchase  and  operate  (except  in 
cases  where  such  lease  or  purchase  is  prohibited  by  the  consti- 
tution of  this  state)  the  whole  or  any  part  of  the  electric  rail- 
road or  electric  railway,  of  any  other  corporation  heretofore  or 
hereafter  constructed,  together  with  the  franchises,  powers, 
immunities  and  all  other  property  or  appurtenances  apper- 
taining thereto:  Provided,  that  such  lease  or  purchase  has 
been  or  shall  be  consented  to  by  stockholders  of  record  hold- 
ing at  least  two-thirds  in  amount  of  the  capital  stock  of 
the  lessor  or  grantor  corporation ;  and  all  such  leases  and  pur- 
chases heretofore  made  or  entered  into  by  consent  of  stock- 
holders as  aforesaid  are  for  all  intents  and  purposes  hereby 
ratified  and  confirmed,  saving,  however,  any  vested  rights  of 
private  parties.     [Laws  1903,  §  3,  p.  366.] 

[§  9083,  Rem.-Bal.]  Every  such  corporation  shall  have 
the  right  to  enter  upon  any  land  between  the  termini  of  the 
proposed  lines  for  the  purpose  of  examining,  locating,  and 
surveying  such  lines,  doing  no  unnecessary  damage  thereby. 
[Laws  1899,  §  2,  p.  147.] 


373  TELEGRAPH    AND    TELEPHONE    COMPANIES.       §§  514-517 


TELEGRAPH  AND  TELEPHONE  COM- 
PANIES. 

§  514.     Right  of  Eminent  Domain  Extended  to. 

[§  9300,  Rem.-Bal.]  The  right  of  eminent  domain  is 
hereby  extended  to  all  telegraph  and  telephone  corporations 
and  companies  organized  or  doing  business  in  the  state. 
[Laws  1890,  §  1,  p.  292;  1  H.  C,  §  1547;  Bal.,  §  4355.] 

A  company  may  condemn  land  in  accordance  with  its  special  charter 
or  subsequent  general  law.  (Cascades  R.  Co.  v.  Sohms,  1  Wash.  Ter. 
557.) 

§  515.    Right  to  Enter  Lands  for  Survey,  etc. 

[§9301,  Rem.-Bal.]  Every  corporation  incorporated  un- 
der the  laws  of  this  state,  or  any  state  or  territory  of  the 
United  States,  for  the  purpose  of  constructing,  operating  or 
maintaining  any  telegraph  or  telephone  in  this  state  shall  have 
the  right  to  enter  upon  any  land  between  the  termini  of  the 
proposed  lines  of  telegraph  or  telephone  for  the  purpose  of 
examining,  locating  and  surveying  the  line  of  such  telegraph 
or  telephone,  doing  no  unnecessary  damage  thereby.  [Ljaws 
1888,  §  1,  p.  65 ;  1  H.  C,  §  1548 ;  Bal.,  §  4356.] 

§  516.     May  Use  Right  of  Way  of  Post  Road. 

[§  9302,  Rem.-Bal.]  Every  railroad  operated  in  this  state 
and  carrying  freight  and  passengers  for  hire,  or  doing  business 
in  this  state,  is  and  shall  be  designated  a  "post  road,"  and  the 
corporation  or  company  owning  the  same  shall  allow  telegraph 
and  telephone  companies  to  construct  and  maintain  telegraph 
and  telephone  lines  on  and  along  the  right  of  way  of  such  rail- 
road.    [Laws  1890,  §  3,  p.  292 ;  1  H.  C,  §  1545 ;  Bal.,  §  4357.] 

§  517.    Discrimination  in  Rates,  Facilities,  etc.,  Prohibited. 

[§  9303,  Rem.-Bal.]  No  railroad  corporation  or  company 
organized  or  doing  business  in  this  state  shall  allow  any  tele- 
graph or  telephone  company,  or  any  individual,  any  facilities, 
privileges,  or  rates  for  transportation  of  men  or  materials,  or 


§§  518-520      EXISTING   CORPORATION   LAWS,    1913.  374 

for  repairing  their  lines,  not  allowed  to  all  telegraph  and  tele- 
phone companies  and  individuals.  [Laws  1890,  §  4,  p.  292 ; 
IH.  C,  §1546;Bal.,  §4358.] 

§  518.     Must  Receive  and  Transmit  Messages. 

[§  9305,  Rem.-Bal.]  Said  corporations  and  companies  shall 
receive,  exchange  and  transmit  each  other's  messages  without 
delay  or  discrimination,  and  all  telephone  companies  shall  re- 
ceive and  transmit  messages  for  any  person.  [Laws  1890, 
§  2,  p.  292;  1  H.  C,  §  1550;  Bal.,  §  4360.] 

§  519.    May  Use  Highways,  for  Poles,  Wires,  etc. 

[§  9314,  Rem.-Bal.]  Any  telegraph  or  telephone  corpora- 
tion or  company,  or  the  lessees  thereof,  doing  business  in  this 
state,  shall  have  the  right  to  construct  and  maintain  all  ne- 
cessary lines  of  telegraph  or  telephone  for  public  traffic  along 
and  upon  any  public  road,  street,  or  highway,  along  or  across 
the  right  of  way  of  any  railroad  corporation,  and  may  erect 
poles,  piers,  or  abutments  for  supporting  the  insulators,  wires 
and  any  other  necessary  fixtures  of  their  lines,  in  such  manner 
and  at  such  points  as  not  to  incommode  the  public  use  of  the 
railroad  or  highway,  or  interrupt  the  navigation  of  the  waters. 
Provided,  that  when  the  right  of  way  of  such  corporation  has 
not  been  acquired  by  or  through  any  grant  or  donation  from 
the  United  States,  or  this  state,  or  any  county,  city  or  town 
therein,  then  the  right  to  construct  and  maintain  such  lines 
shall  be  secured  only  by  the  exercise  of  right  of  eminent 
domain,  as  provided  by  law :  Provided  further,  that  where  the 
right  of  way  as  herein  contemplated  is  within  the  corporate 
limits  of  any  incorporated  city,  the  consent  of  the  city  council 
thereof  shall  be  first  obtained  before  such  telegraph  or  tele- 
phone lines  can  be  erected  thereon.  [Laws  1890,  §  5,  p.  292; 
1  H.  C,  §1561;  Bal.,  §4369.] 

§  520.    Injury  to  Line — Vessel  Dragging  Anchor. 

[§  9315,  Rem.-Bal.]  Any  person  who  injures  or  destroys, 
through  want  of  proper  care,  any  necessary  or  useful  fixtures 
of  any  telegraph  or  telephone  corporation  or  company,  is  liable 
to   the   corporation  or   company   for   all   damages  sustained 


375  TELEGRAPH    AND    TELEPHONE    COMPANIES.       §§  521-524 

thereby.  Any  vessel  which,  by  drapfring  its  anchor  or  other- 
wise, breaks,  injures  or  destroys  the  subaqueous  cable  of  a 
telegraph  or  telephone  corporation  or  company,  subjects  its 
owners  to  the  damages  hereinbefore  specified.  [Laws  1890, 
§  6,  p.  293 ;  1  II.  C,  §  1562 ;  Bal.,  §  4370.] 

§  521.    Malicious  Injury. 

[§  9316,  Rem.-Bal.]  Any  person  who  willfully  and  mali- 
ciously does  any  injury  to  any  telegraph  or  telephone  property 
mentioned  in  the  preceding  section,  is  liable  to  the  corporation 
or  company  for  five  times  the  amount  of  actual  damages  sus- 
tained thereby,  to  be  recovered  in  any  court  of  competent 
jurisdiction.  [Laws  1890,  §  7,  p.  293;  1  H.  C,  §  1563;  Bal., 
§4371.] 

§  522.     Penalty  for  Failure  to  Transmit  Messages. 

[§  9317,  Rem.-Bal.]  In  case  of  the  refusal  or  neglect  of 
any  telegraph  or  telephone  corporation  to  comply  with  the 
provisions  of  section  number  two  [9305,  Rem.-Bal.],  the  pen- 
alty for  the  same  shall  be  a  fine  of  not  more  than  five  hundred 
nor  less  than  one  hundred  dollars  for  each  offense.  [Laws 
1890,  §  8,  p.  293;  1  H.  C,  §  1564;  Bal.,  §  4372.] 

§  523.    Railroad  Refusing  Privileges. 

[§  9318,  Rem.-Bal.]  In  ease  of  the  refusal  or  neglect  of 
any  railroad  company  or  corporation  to  comply  with  the  pro- 
visions of  section  number  three  [9302,  Rem.-Bal.],  said  com- 
pany or  corporation  shall  be  liable  for  damages  in  the  sum  of 
not  less  than  one  thousand  dollars  nor  more  than  five  thousand 
dollars  for  each  offense,  and  one  hundred  dollars  per  day  dur- 
ing the  continuance  thereof.  [Laws  1890,  §  9,  p.  293;  1  H.  C, 
§1565;  Bal.,  §4373.] 

§  524.     Subaqueous  Cables  to  be  Marked. 

[§  9319,  Rem.-Bal.]  No  telegraph  or  telephone  corporation 
or  company  can  recover  damages  for  the  breaking  or  injury 
of  any  subaqueous  telegraph  cable  unless  such  corporation  or 
company  has  previously  erected  on  either  bank  of  the  waters 


§  524  EXISTING  CORPORATION  LAWS,   1913.  376 

under  which  the  cable  is  placed,  a  monument  indicating  the 
place  where  the  cable  lies,  and  publishes  for  one  month,  in 
some  newspaper  most  likely  to  give  notice  to  navigators,  a  no- 
tice giving  a  description  and  the  purpose  of  the  monuments, 
and  the  general  course,  landing  and  termini  of  the  cable. 
[Laws  1890,  §  10,  p.  293;  1  H.  C,  §  1566;  Bal,  §  4374.] 


377  BOOM   COMPANIES.  §  525 


BOOM  COMPANIES. 

§  525.     Boom  Companies  may  Condemn. 

[§  7110,  Rem.-Bal.]  Any  corporation  heretofore  or  here- 
after organized  in  the  state  of  Washington  for  the  purpose  of 
catching,  booming,  sorting,  rafting  and  holding  logs,  lumber 
or  other  timber  products,  shall  have  power  to  acquire,  hold, 
use  and  transfer  all  such  real  and  personal  property  or  estate, 
by  lease  or  purchase,  as  shall  be  necessary  for  carrying  on  the 
business  of  said  corporation.  If  such  corporation  shall  not  be 
able  to  agree  with  persons  owning  land,  shore  rights,  or  other 
property  sought  to  be  appropriated,  as  to  the  amount  of  com- 
pensation to  be  paid  therefor,  the  compensation  therefor  may 
be  assessed  and  determined  and  the  appropriation  made  in  the 
manner  provided  by  law  for  the  appropriation  of  private  prop- 
erty by  railways :  Provided,  that  any  property  acquired  under 
the  provisions  of  this  act  by  the  exercise  of  the  right  of 
eminent  domain  shall  be  used  exclusively  for  the  purposes  of 
this  act;  and  whenever  the  use  of  said  property  as  herein  con- 
templated shall  cease  for  a  period  of  one  year,  the  same  shall 
revert  to  the  original  owner,  his  heirs  or  assigns,  upon  the 
repayment  of  the  original  cost  of  same.  [Laws  1890,  §  1, 
p.  470;  1  H.  C,  §  1590;  Bal,  §  4378.] 

A  company  may  condemn  land  in  accordance  with  its  special  charter 
or  subsequent  general  law.  (Cascades  R.  Co.  v.  Sohms,  1  Wash.  Ter. 
557.) 

A  statutory  right  to  form  boom  companies  is  a  franchise,  but  not  ex- 
clusive. (Chehalis  Boom  Co.  v.  Chehalis  County,  24  Wash.  135,  63  Pac. 
1123.) 

Boom  companies  are  quasi  public  and  may  be  given  right  to  condemn. 
(North  River  Boom  Co.  v.  Smith,  15  Wash.  138,  45  Pac.  750;  Matthews 
V.  Belfast  Mfg.  Co.,  35  Wash.  662,  77  Pac.  1046.) 

Boom  companies  are  common  carriers.  (State  ex  rel.  Nicomen  Co.  v. 
North  S.  etc.  Co.,  55  Wash.  1,  103  Pac.  426,  107  Pac.  196.) 

The  legislature  cannot  authorize  a  boom  company  to  overflow  land 
of  riparian  owners  on  navigable  river.  (Burrows  v.  Gray's  Harbor  Boom 
Co.,  44  Wash.  630.) 

Use  of  tide  lands  not  authorized  except  by  purchase  or  agreement. 
(Samish  Boom  Co.  v.  Calvert,  27  Wash.  611.) 


§  526  EXISTING  CORPORATION  LAWS,    1913.  378 

Not  monopoly  for  boom  company  to  control  booming  of  a  river  where 
more  than  one  company  not  feasible.  (Nicomen  Boom  Co.  v.  North  Shore 
Co.,  40  Wash.  315.) 

Boom  company  is  quasi-public  corporation.  (North  River  Boom  Co.  v. 
Smith,  15  Wash.  138.) 

§  526.     Filing  Plat  and  Survey. 

[§  7111,  Rem.-Bal.]  Any  corporation  hereafter  organized 
for  the  purpose  mentioned  in  section  one  of  this  act  [7110, 
Rem.-Bal.],  shall  within  ninety  days  after  its  articles  of  in- 
corporation have  been  filed,  proceed  to  file  in  the  office  of  the 
Secretary  of  State  a  plat  or  survey  of  so  much  of  the  shore 
lands  or  the  waters  of  the  state  and  lands  contiguous  thereto 
as  are  proposed  to  be  appropriated  for  said  purpose  by  said 
corporation.  Any  corporation  heretofore  organized  in  the 
territory  of  Washington  for  any  of  the  purposes  expressed 
in  section  one  (1)  of  this  act  [7110,  Rem.-Bal.],  shall  file 
such  plat  within  ninety  days  after  the  passage  of  this  act. 
Such  plat  shall  be  made  from  the  records  of  the  United 
States  in  the  surveyor  general's  office  of  this  state,  or  by 
competent  surveyor,  subsequent  to  actual  survey.  Such  cor- 
poration may  from  time  to  time  whenever  it  desires  to  ex- 
tend its  operations  to  portions  of  streams  not  embraced  in  its 
original  plat,  or  to  other  streams  tributary  to  the  stream  or 
streams  described  in  such  original  plat,  or  any  portion  of  such 
streams,  or  in  any  manner  to  change,  modify  or  correct  its 
original  plat,  file  additional  plats  or  surveys  in  the  office  of 
the  Secretary  of  State,  of  so  much  of  the  shore  lines  of  the 
waters  of  the  state  and  lands  contiguous  thereto  as  are  pro- 
posed to  be  appropriated  for  said  purposes  by  said  corpora- 
tion, and  whenever  by  reason  of  floods  or  otherwise,  the  chan- 
nel of  any  stream  shall  be  so  changed  as  to  put  such  stream 
beyond  the  limits  of  said  original  plat,  or  any  supplemental 
or  additional  plat  filed  pursuant  to  the  provisions  of  this  sec- 
tion, such  corporation  may  file  in  the  office  of  the  Secretary 
of  State  additional  plats  or  surveys  showing  the  change  in  said 
channel  and  so  much  of  the  shore  lines  of  the  waters  of  the 
state  and  lands  contiguous  thereto  as  are  proposed  to  be  ap- 
propriated for  said  purposes  by  said  corporation  which  shall 


379  BOOM  COMPANIES.  §§  527, 528 

vest  it  with  the  same  rights  that  it  acquired  by  the  filing  of 
said  original  plat.  [Laws  1907,  §  2,  p.  76;  1  H.  C,  §  1591; 
Bal.,  §  4379.] 

Ballinger's  Code,  section  4379,  gives  a  boom  company  right  to  condemn 
the  land  selected  in  its  plat  of  survey.  (Samish  River  Boom  Co.  v. 
Union  Boom  Co.,  32  Wash.  586,  73  Pac.  670.) 

Riparian  rights  on  navigable  river  are  subject  to  condemnation  by 
boom  company  to  give  public  service,  and  plat  showing  contiguous  land 
is  suflBcient  to  warrant  condemnation  of  such  contiguous  land.  (Burrows 
V.  Gray's  Harbor  Boom  Co.,  44  Wash.  630.) 

A  boom  company  has  the  power  to  select  the  location  designated  in 
the  plat.     (Samish  River  Boom  Co.  v.  Union  Boom  Co.,  32  Wash.  68G.) 

§  527.    Powers  of  Corporations. 

[§  7112,  Rem.-Bal.]  Such  corporations  shall  have  power 
and  are  hereby  authorized,  in  any  of  the  waters  of  this  state, 
or  the  dividing  waters  thereof,  to  construct,  maintain  and  use 
all  necessary  sheer  or  receiving  booms,  dolphins,  piers,  piles  or 
other  structure  necessary  or  convenient  for  carrying  on  the 
business  of  such  corporations:  Provided,  that  such  boom  or 
booms,  sheer  booms  or  receiving  booms  shall  be  so  constructed 
as  to  allow  the  free  passage  between  any  of  such  booms  and  the 
opposite  shore  for  all  boats,  vessels  or  steam  crafts  of  any 
kind  whatsoever,  or  for  ordinary  purposes  of  navigation. 
[Laws  1890,  §  3,  p.  471 ;  1  H.  C,  §  1592 ;  Bal.,  §  4380.] 

Permanent  structures  violating  riparian  rights  and  obstructing  navi- 
gation not  authorized.  (Burrows  v.  Gray's  Harbor  Boom  Co.,  4-1 
Wash.  &30.) 

§  528.    Duty  of— Tolls. 

[§  7113,  Rem.-Bal.]  After  such  works  shall  have  been  con- 
structed, such  corporation  shall  catch,  hold  and  assort  the  logs 
and  timber  products  of  all  persons  requesting  such  service, 
upon  the  same  terms  and  without  discrimination ;  and  shall 
have  the  right,  in  consideration  of  the  convenience  and  se- 
curity afforded  to  the  public  in  the  handling  of  logs  and 
timber  products,  to  charge  and  collect  tolls  on  all  logs  or  other 
timber  products,  caught  within  their  works  and  upon  the 
order  or  request  of  the  owner  or  owners  thereof,  and  there 
assorted,  boomed  or  rafted ;  said  tolls  shall  not  exceed  seventy- 


§  529  EXISTING  CORPORATION  LAWS,   1913.  380 

five  cents  per  thousand  feet  on  logs,  spars  or  other  large  tim- 
ber, and  reasonable  rates  on  all  other  timber  products: 
Provided,  that  it  shall  be  the  duty  of  any  corporation  oper- 
ating a  boom  at  the  mouth  of  any  river,  to  catch  and  hold, 
assort,  boom  and  raft  all  logs  and  timber  products  except  such 
as  may  be  already  in  charge  of  its  owner  or  his  agente,  with- 
out request  of  the  owner  or  owners,  and  shall  have  the  right 
to  charge  and  collect  tolls  not  to  exceed  seventy-five  cents  per 
thousand  feet  for  such  service.  The  amount  of  logs  or  tim- 
ber is  to  be  board  measure,  to  be  ascertained  by  the  usual  legal 
method  of  scaling;  and  such  corporation  shall  have  a  lien 
upon  the  logs  and  timber  products  for  the  driving,  floating, 
booming,  sorting  and  rafting  thereof,  and  the  right  to  enforce 
such  liens  in  any  manner  provided  or  that  may  be  provided  by 
law  for  the  enforcement  of  liens  upon  personal  property. 
Such  corporation  shall,  as  soon  as  practicable,  deliver  logs  or 
other  timber  products  caught  within  their  booms,  sorted  and 
rafted  ready  for  towing,  to  the  owner  or  owners  thereof,  and  if 
required  to  hold  such  property  for  more  than  thirty  days,  shall 
have  the  right  to  charge  a  reasonable  rate  for  such  storage  for 
the  period  of  excess.  [Laws  1890,  §  4,  p.  471 ;  1  H.  C,  §  1593 ; 
Bal.,  §  4381.] 

Written  contract  not  essential  to  recovery  for  loss  of  logs.  (Tingley  V. 
Bellingham  Bay  Co.,  5  Wash.  644.) 

Tolls  must  not  exceed  statutory  rates,  and  must  be  reasonable.  (Cas- 
cade Boom  Co.  V.  McNeely  Log  Co.,  37  Wash.  203;  Gray's  Harbor 
Boom  Co.  V.  Lytle  Log  etc.  Co.,  36  Wash.  151;  Washongal  etc.  Co.  v, 
Skamania  Log  Co.,  23  Wash.  89;  Gray's  Harbor  Boom  Co.  v.  McArmont, 
21  Wash.  465.) 

§  529.    Assorting  and  Separating  Logs. 

[§  7114,  Rem.-Bal.]  It  shall  be  the  duty  of  all  said  boom 
corporations,  in  assorting,  to  separate  the  logs,  lumber  or  other 
timber  products  into  separate  booms  ready  for  towing,  so  that 
logs  or  other  timber  products  shall  go  to  the  mills  or  place  in- 
tended for  use  or  storage  in  one  or  more  booms:  Provided, 
that  in  case  more  than  one  boom  is  located  on  or  in  the  same 
river  or  its  tributaries,  the  corporation  owning  the  upper 
boom  or  works  shall  pass  free  of  charge  all  saw-logs  or  other 


381  BOOM  COMPANIES.  §§  530-532 

timber   products    consigned    to    the    lower   boom    or    booms. 
[Laws  1890,  §  5,  p.  472;  1  II.  C,  §  1594;  Bal.,  §  4382.] 

§  530.     Record  of  Rafts  Assorted. 

[§  7115,  Rem.-Bal.]  It  shall  be  the  duty  of  every  corpora- 
tion organized  and  transacting  business  under  the  provisions 
of  this  act  to  keep  in  the  office  of  its  secretary,  open  to  public 
inspection,  a  book  or  books  in  which  shall  be  truly  recorded 
the  facts,  so  far  as  known,  regarding  each  and  every  raft  by 
it  assorted.  Such  record  shall  specify  :  1st,  names  of  owners ; 
2d,  marks  or  brands;  3d,  number  of  logs  in  each  boom;  4th, 
number  of  feet  in  boom;  5th,  name  of  steamer  receiving  pos- 
session; 6th,  date  of  departure  from  boom.  [Laws  1890, 
§  6,  p.  472 ;  1  H.  C,  §  1595 ;  Bal.,  §  4383.] 

§  531.     Liability  for  Damage. 

[§  7116,  Rem.-Bal.]  Corporations  organized  in  accordance 
with  the  provisions  of  this  act  shall  be  liable  to  the  owner  or 
owners  of  logs  or  other  timber  products  for  all  loss  or  damage 
resultant  from  neglect,  carelessness  or  unnecessary  delay  on 
the  part  of  servants  of  such  corporations :  Provided,  that  loss 
caused  by  fire  and  ice,  which  cannot  be  reasonably  guarded 
against,  shall  not  be  construed  as  resultant  upon  neglect  or 
carelessness  on  the  part  of  the  corporation.  [Laws  1890, 
§  7,  p.  472 ;  1  H.  C,  §  1596 ;  Bal.,  §  4384.] 

In  action  for  conversion  of  logs  it  is  immaterial  whether  the  logs  were 
wrongfullj  cut  up  or  converted.  (Shields  v.  Doty  etc.  Co.,  48  Wash. 
679.) 

§  532.    Damages  for  Neglect. 

[§  7117,  Rem.-Bal.]  In  addition  to  such  damages  as  are 
herein  provided  for  any  corporation  willfully  neglecting  to  as- 
sort and  deliver  such  logs  and  timber  products  according  to 
the  provisions  of  this  act,  it  shall  be  liable  to  a  fine  not  exceed- 
ing twenty  per  centum  of  the  value  of  such  property  which  it 
shall  have  failed  to  deliver,  but  no  such  corporation  shall  be 
liable  to  such  damages  or  penalty  if  said  owner  or  owners  of 
such  logs  or  timber  products  shall  have  failed  to  furnish  the 


§§  533-535    EXISTING  corporation  laws,  1913,  382 

necessary  boom  sticks  and  chains  to  raft  the  same.     [Laws 
1890,  §  8,  p.  472;  1  H.  C,  §  1597;  Bal.,  §  4385.] 

§  533.     Public  Waterways. 

[§  7118,  Rem.-Bal.]  All  meandered  rivers,  meandered 
sloughs  and  navigable  waters  in  this  state  shall  be  deemed  as 
public  highways,  and  said  corporations  shall  be  declared  public 
corporations  for  the  purpose  of  this  act ;  and  the  improvement 
of  such  streams,  sloughs  and  waters  shall  be  deemed  and  de- 
clared a  public  use  and  benefit.  [Laws  1890,  §  9,  p.  473 ;  1  H. 
C,  §1598;  Bal.,  §4386.] 

§  534.     Corporations — Powers  of. 

[§  7119,  Rem.-Bal.]  Any  corporation  having  for  its  object, 
in  whole  or  in  part,  the  clearing  out  and  improvement  of  rivers 
and  streams  in  this  state,  and  for  the  purpose  of  driving,  sort- 
ing, holding  and  delivering  logs  and  other  timber  products 
thereon,  may  be  organized  under  the  laws  of  this  state,  and  in 
accordance  with  the  provisions  of  the  codes  and  statutes  of 
Washington,  as  set  down  and  numbered  in  volume  1  of  Hill's 
Annotated  Statutes  and  Codes  of  Washington,  sections  1497 
to  1520,  inclusive,  and  such  corporations  shall  have  all  powers 
and  be  subject  to  all  the  liabilities  and  duties  therein  men- 
tioned.    [Laws  1895,  §  1,  p.  128 ;  Bal.,  §  4387.] 

1  H.  C,  §§  1497-1520=Ch.  1,  Tit.  25,  Eem.-Bal. 

The  right  to  form  boom  company  is  a  franchise,  though  not  exclusive. 
(Chehalis  Boom  Co.  v.  Chehalis  County,  24  Wash.  135.) 

State  not  necessary  party  to  condemnation  by  boom  company  of  tide 
lands.     (North  River  Boom  Co.  v.  Smith,  15  Wash.  138.) 

Allegation  of  contract  for  driving  logs  admission  of  its  ratification. 
(Tingley  v.  Bellingham  Bay  Boom  Co.,  5  Wash.  644.) 

§  535.    Authority  and  Power  of  Eminent  Domain. 

[§  7120,  Rem.-Bal.]  Such  corporation  shall  have  power  to 
acquire,  hold,  use  and  transfer  all  such  real  and  personal 
property  or  estate,  by  lease  or  purchase,  as  shall  be  neces- 
sary for  carrying  on  the  business  of  said  corporation.  If 
such  corporation  shall  not  be  able  to  agree  with  persons  own- 
ing land,  shore  rights  or  other  property  sought  to  be  appro- 


I 


383  BOOM   COMPANIES.  §  536 

priated,  as  to  the  amount  of  compensation  to  be  paid  therefor, 
the  compensation  therefor  may  be  assessed  and  determined 
and  the  appropriation  thereof  be  made  in  the  manner  provided 
by  law  for  the  appropriation  of  private  property  in  chapter 
6  of  title  9,  volume  2,  Hill's  Annotated  Statutes  and  Codes  of 
Washington :  Provided,  that  any  property  acquired  under  the 
provisions  of  this  act  for  the  purposes  herein  mentioned  by 
the  exercise  of  the  right  of  eminent  domain  shall  be  used  ex- 
clusively for  the  purpose  aforesaid;  and  whenever  the  use  of 
said  property  acquired  by  the  right  of  eminent  domain,  as 
herein  contemplated,  shall  cease  for  a  period  of  one  year,  the 
same  shall  revert  to  the  original  owner,  his  heirs  or  assigns. 
[Laws  1895,  §  2,  p.  129;  Bal.,  §  4388.] 

Ch.  6,  Tit.  9,  2  H.  C.  =  Ch.  5,  Tit.  6,  §  921  et  seq.,  Rem.-Bal. 

Use  of  banks  of  stream  by  boom  company  for  artificial  freshets  is 
public  use.  (State  ex  rel.  Wilson  v.  Superior  Court,  47  Wash.  397,  92 
Pac.  269;  State  ex  rel.  Pealer  v.  Superior  Court,  58  Wash.  565,  109  Pac. 
340.) 

A  riparian  owner  may  enjoin  log-driving  company  from  retarding 
natural  flow  of  stream.  (Kalama  etc.  Co.  v.  Kalama  Driving  Co.,  48 
Wash.  612.) 

§  536.    Plats,  When  Filed. 

[§  7121,  Rem.-Bal.]  Any  corporation  organized  for  the  pur- 
poses mentioned  in  section  one  of  this  act  [7119,  Rem.-Bal.] 
shall,  within  ninety  days  after  its  articles  of  incorporation  shall 
have  been  filed,  proceed  to  file  in  the  office  of  the  Secretary  of 
State  a  plat  or  survey  of  so  much  of  the  shore  lines  of  the  waters 
of  the  state  or  of  any  of  the  rivers  or  streams  thereof  and  lands 
contiguous  thereto  as  are  proposed  to  be  appropriated  for  such 
purposes  by  said  corporation.  Such  plat  shall  be  made  from 
the  records  of  the  United  States  in  the  of^ce  of  the  surveyor 
general  of  this  state,  or  by  a  competent  surveyor,  after  actual 
survey,  from  the  notes  thereof,  and  whenever  such  appropria- 
tion is  made  upon  unsurveyed  lands,  then  by  an  actual  survey 
made  by  a  competent  surveyor.  Such  corporation  may  from 
time  to  time,  whenever  it  desires  to  extend  its  operations  to 
portions  of  streams  not  embraced  in  its  original  plat,  or  to 
other  streams  tributary  to  the  stream  or  streams  described  in 


§  537  EXISTING  CORPORATION  LAWS,   1913.  384 

such  original  plat,  or  any  portion  of  such  streams,  file  addi- 
tional plats  in  the  office  of  the  Secretary  of  State,  and  when- 
ever by  reason  of  floods  or  otherwise,  the  channel  of  any 
stream  shall  be  so  changed  as  to  put  such  streams  beyond  the 
limits  of  said  original  plat,  or  any  supplemental  or  additional 
plat  filed  pursuant  to  the  provisions  of  this  section,  such  cor- 
poration may  file  in  the  office  of  the  Secretary  of  State  sup- 
plemental plats  showing  the  change  in  said  channel  which  shall 
vest  it  with  the  same  rights  that  it  acquired  by  the  filing  of 
said  original  plat.     [Laws  1905,  §  1,  p.  232 ;  Bal.,  §  4389.] 

The  purpose  of  the  plat  is  that  of  notice,  and  a  company  may  in 
proper  case  condemn  lands  outside  the  plat.  (State  ex  rel.  Gray's 
Harbor  Co.  v.  Superior  Court,  57  Wash.  71,  106  Pac.  481.) 

§  537.     General  Powers  and  Duties. 

[§  7122,  Rem.-Bal.]  Such  corporation  shall  have  power 
and  is  hereby  authorized  in  any  of  the  rivers  and  streams  of 
this  state,  or  the  dividing  waters  thereof,  to  remove  jams, 
roots,  snags  and  rocks,  improve  and  straighten  the  channel, 
build  wing  dams  and  sheer  booms,  construct  dams  and  gates, 
or  otherwise,  for  the  purpose  of  storing  water  with  which  to 
produce  artificial  freshets  and  for  the  purpose  of  holding  logs 
and  other  timber  products  and  in  all  ways  to  improve  such 
streams  and  rivers  for  the  purposes  herein  mentioned  and  con- 
templated: Provided,  that  no  such  wing  dam,  sheer  boom, 
dam  with  gate  or  otherwise,  shall  be  so  constructed,  maintained 
or  used  as  to  in  any  manner  obstruct  or  impede  the  outlet  of 
such  stream:  And  provided  further,  that  if  any  such  wing 
dam,  sheer  boom,  dam  with  gate  or  otherwise  shall  be  so  con- 
structed, maintained  or  used  as  to  interfere  with  the  use  for 
any  purpose  of  the  waters  of  any  stream  or  dammed  or  used, 
or  any  of  its  tributaries,  or  in  any  manner  to  injure  or  dam- 
age any  lands  adjacent  to  such  stream  or  its  tributaries,  com- 
pensation for  such  interference  with  the  use  of  such  water  and 
for  any  such  injury  or  damage  shall  be  first  assessed  and 
determined  and  the  appropriation  thereof  may  be  made  by 
the  exercise  of  the  power  of  eminent  domain  in  the  manner 
provided  in  section  two  of  this  act :  Provided,  however,  that 
whenever  the  owners  of  more  than  one-half  of  the  land  lying 


385  BOOM   COMPANIES.  §  538 

alongside  or  abutting  on  any  stream  affected  by  the  tide,  pro- 
posed to  be  improved  according  to  this  act,  shall  file  with  the 
board  of  county  commissioners  of  the  county  in  which  said  river 
is  situated  a  remonstrance  against  any  improvements  of  so 
much  of  the  stream  as  is  affected  by  the  tide,  it  shall  then  be  un- 
lawful for  any  corporation  to  take  the  land  or  any  slough  within 
the  territory  owned  by  any  such  remonstrancers :  Provided,  that 
such  remonstrance  shall  be  filed  with  said  board  within  fifteen 
days  from  the  filing  of  said  plat.  Nothing  in  this  act  shall 
be  construed  to  authorize  the  taking  or  damaging  of  any 
power  plant  constructed  or  being  constructed  for  the  creation 
or  utilization  of  water-power.  [Laws  1905,  §  1,  c.  57,  p.  108 ; 
Bal.,  §  4390.] 

§  2=  §  7120,  Rem.-Bal. 

Section  construed  to  give  by  necessary  implication  right  to  obstruct 
restricted  navigation  on  small  streams.  (State  ex  rel.  Pealer  v.  Superior 
Court,  58  Wash.  565,  109  Pac.  340.) 

§  538.  Driving  Logs — Tolls — Booming  and  Rafting — Liens. 
[§  7123,  Rem.-Bal.]  After  such  corporation  shall  have  en- 
tered upon  its  duties,  which  shall  be  within  three  months  of 
the  filing  of  its  maps  of  location,  such  corporation  shall  come 
in  streams  theretofore  navigable,  upon  the  request  of  the  own- 
ers, and  in  case  of  logs  and  other  timber  products  being 
commingled,  or  lying  in  such  a  position  as  to  obstruct  or  im- 
pede the  drive,  without  such  request:  Provided,  that  when  a 
navigable  stream  upon  which  it  was  not  previously  practicable 
to  float  logs  or  other  timber  products  is  improved  by  clearing 
out  rocks,  straightening  the  channel,  or  the  construction  of 
wing  dams  and  sheers  by  the  corporation  having  a  charter 
thereon,  and  thereby  aiding  and  assisting  the  floating  of  logs 
and  other  timber  products,  a  corporation  shall  be  entitled  to 
driving  charges  on  all  such  logs  or  other  timber  products 
placed  in  said  stream  without  request  to  drive  the  same,  and 
in  streams  not  navigable  before  such  improvements  were 
made,  without  request,  sluice,  sack  and  drive  all  logs  and 
other  timber  products  of  suitable  length  that  may  be  placed  in 
the  beds  of  the  stream  improved  as  aforesaid,  or  that  may  be 
25 


§  539  EXISTING  CORPORATION   LAWS,   1913.  386 

delivered  into  its  ponds,  and  shall  handle  all  such  logs  and 
other  timber  products  of  all  persons  upon  the  same  terms, 
without  discrimination  as  to  time  of  sluicing,  sacking  and  driv- 
ing such  logs,  or  other  timber  products,  and  shall  be  entitled 
to  charge  and  collect  reasonable  and  uniform  tolls  for  such 
services  and  improvements,  on  all  logs  and  other  timber  prod- 
ucts so  handled,  or  sheered  out  of  sloughs  or  off  bars  by  means 
of  such  improvements;  such  tolls  shall  not  exceed  one  dollar 
per  thousand  feet,  board  measure,  on  logs,  spars,  or  other 
large  timber,  and  reasonable  compensation  on  all  other  tim- 
ber products,   for  the   use   of  such   improvements,   and  for 
sluicing,  sacking  and  driving  the  same,  such  charges  to  be  fixed 
by  the  board  of  trustees  of  such  corporation  in  proportion  to 
the  distance  such  timber  is  to  be  driven  and  the  number  of 
dams  through  which  the  same  is  necessarily  sluiced  or  sheered, 
and  in  case  any  such  corporation  shall  be  engaged  in  the  boom- 
ing and  rafting  of  logs  and  other  timber  so  sluiced,  sacked 
and  driven,  an  additional  sum  not  to  exceed  sixty  cents  per 
thousand  feet  for  logs,  spars  and  other  large  timber,  and  rea- 
sonable compensation  on  all  other  timber  products  may  be 
charged  for  booming  and  rafting  the  same ;  the  amount  of  such 
logs  and  other  products  is  to  be  determined  by  the  usual 
method  of  scaling,  and  such  corporation  shall  have  a  lien  upon 
all  logs  and  other  timber  products  handled  for  sluicing,  sack- 
ing and  driving,  and  for  booming  and  rafting  the  same,  to 
be  enforced  in  any  manner  now  or  hereafter  provided  by  law 
for  the  enforcement  of  liens  for  labor  on  logs.     [Laws  1909, 
§1,  p.  816;  BaL,  §4391.] 

This  section  is  constitutional.  (East  Hoquiam  Boom  etc.  Co.  v.  Nee- 
son,  20  Wash.  142.) 

Boom  companies  for  public  service  are  public  corporations.  (North 
River  Boom  Co.  v.  Smith,  15  Wash.  138.) 

§  539.    Damages  for  Neglect. 

[§  7124,  Rem.-Bal.]  Any  corporation  acting  under  and  in 
accordance  with  the  provisions  of  this  act  shall  be  liable  to  the 
owner  or  owners  of  logs  or  other  timber  products  for  all  loss 
or  damage  resulting  from  neglect,  carelessness  or  unnecessary 


I 

I 


387  BOOM  COMPANIES.  §§540,541 

delay  on  the  part  of  such  corporation  or  its  agents.     [Laws 
1895,  §6,  p.  131;  Bal.,  §4392.] 

§  540.    Rights  to  Cease,  When, 

[§7125,  Rem.-Bal.]  Should  any  corporation  neglect,  for 
the  period  of  eight  months  after  improving  any  stream  or 
river,  to  operate  its  dams,  or  to  otherwise  perform  its  duties 
as  herein  provided,  then  all  rights  herein  conferred  to  such 
corporations  upon  such  streams  or  rivers,  or  portions  thereof, 
shall  cease.     [Laws  1895,  §7,  p.  131;  Bal.,  §4393.] 

Mere  lack  of  business  not  necessarily  nonuser.  (State  ex  rel.  Wilson 
v.  Superior  Court,  47  Wash.  397.) 

§  541.    Boom  Companies,  Rig-hts  of. 

[§  7126,  Rem.-Bal.]  Duly  organized  boom  companies  at 
present  operating  upon  any  of  the  streams  or  rivers  of  this 
state  may  file  amended  articles  of  incorporation  to  embrace 
the  provisions  of  this  act,  and  for  the  purpose  of  time  limita- 
tions mentioned  in  this  act,  the  time  of  filing  such  amended 
articles  of  incorporation  shall  be  deemed  to  be  the  time  of 
organization  thereof,  but  failure  to  comply  with  the  provisions 
of  this  act  shall  work  forfeiture  of  the  rights  of  such  corpora- 
tions only  so  far  as  the  same  are  subjoined  under  the  provi- 
sions of  this  paragraph.  [Laws  1895,  §8,  p.  131  j  Bal.,  § 
4394.] 


§§  542-544    EXISTING  corporation  laws,  1913.  388 


TOLL-LOaGING  ROADS  AND  WAYS. 

§  542.    Articles  of  Incorporation. 

[§  7106,  Rem.-Bal.]  Any  two  or  more  persons  may  incor- 
porate a  company,  having  for  its  principal  object  the  construc- 
tion, maintenance  and  operation  of  logging  roads,  chutes, 
flumes  and  artificial  watercourses,  or  waterways  and  other 
ways,  for  the  transportation  of  logs  and  other  timber  products. 
Such  corporation  shall  have  power  to  acquire,  hold,  use  and 
transfer  all  such  real  and  personal  property  as  shall  be  rea- 
sonably necessary  for  carrying  on  the  business  of  such  corpora- 
tion.    [Laws  1905,  §  1,  p.  161,  c.  82.] 

"Person"  construed  to  be  individual  as  distinct  from  corporation. 
(Denny  Hotel  Co.  v.  Schram,  6  Wash.  134.) 

Company  may  make  its  own  selection  for  toll-logging  road.  (State 
ex  rel.  Clark  v.  Superior  Court,  62  Wash.  612,  114  Pac.  444.) 

§  543.     Power  of  Corporation. 

[§  7107,  Rem.-Bal.]  Such  corporation  shall  have  power  to 
build,  construct,  maintain  and  operate  logging  roads,  whether 
skid  roads,  railroads  or  any  other  kind,  also  chutes,  flumes  and 
artificial  watercourses,  waterways  and  other  ways,  for  the 
transportation  of  logs  or  any  other  timber  products,  together 
with  all  necessary  yarding  grounds,  roUways  and  landings. 
[Laws  1905,  §  2,  p.  161,  c.  82.] 

§  544.     To  Transport  Lumber,  Logs,  etc. — Lien  for  Services. 

[§  7108,  Rem.-Bal.]  After  any  such  logging  road,  way, 
chute,  flume,  or  artificial  watercourse  or  other  improvements 
shall  have  been  constructed,  such  company  shall  transport  all 
timber  products  offered  to  it  for  carriage  as  its  means  of  trans- 
portation are  adapted  to  carry,  and  such  company  shall  have 
the  right  to  charge  reasonable  tolls  for  the  use  thereof,  which 
tolls  shall  be  uniform,  having  due  regard  to  the  portion  or 
length  of  any  such  logging  road,  way,  chute,  flume,  or  artificial 
watercourse  or  other  improvements  used  by  any  person.  Such 
company  shall  have  a  lien  for  the  amount  of  its  reasonable  tolls 


389  TOLL-LOGGING    ROADS   AND   WAYS.  §  545 

and  charges  upon  any  and  all  logs  or  other  timber  products 
transported  by  it  over  its  logging  road,  way,  chute,  flume  or 
artificial  watercourse.  Notice  of  such  lien  shall  be  filed,  and 
the  same  shall  be  enforced,  in  the  same  manner  as  is  now  or 
may  hereafter  be  provided  for  the  filing  and  enforcement  of 
liens  on  logs  by  boom  companies.  [Laws  1905,  §  3,  p.  162, 
c.  82.] 

§  545.  Deemed  Common  Cajriers — Right  of  Eminent  Do- 
main. 
[§  7109,  Rem.-Bal.]  Such  companies  shall  be  deemed  quasi- 
public  companies  and  common  carriers,  and  any  such  company 
shall  have  the  right  of  eminent  domain,  and  shall  have  the 
right  to  appropriate  and  condemn  lands  and  property  for  its 
use.  Such  right  of  condemnation  and  of  eminent  domain  shall 
be  exercised  in  the  same  man'ner  as  is  now,  or  may  hereafter 
be,  provided  by  law  for  the  condemnation  of  property  by 
ordinary  railroad  corporations  exercising  the  right  of  eminent 
domain :  Provided,  that  the  right  of  eminent  domain  shall  not 
be  exercised  by  any  such  corporation  with  respect  to  any  resi- 
dence :  And  provided  further,  that  any  property  acquired  by 
such  corporation  under  the  provisions  of  this  act  by  the  exer- 
cise of  the  right  of  eminent  domain  shall  be  used  exclusively 
for  the  purposes  of  this  act;  and  whenever  the  use  of  such 
property  as  herein  contemplated  shall  cease  for  the  period  of 
one  year,  the  property  shall  revert  to  the  original  owner,  his 
heirs  or  assigns.  Nothing  in  this  act  shall  be  construed  to  au- 
thorize the  taking  or  damaging  of  any  power  plant  constructed 
or  being  constructed  for  the  creation  or  utilization  of  water 
power.     [Laws  1905,  §  4,  p.  162,  c.  82.] 

A  company  may  condemn  land  in  accordance  with  its  special  charter 
or  subsequent  general  law.  (Cascades  R.  Co.  v.  Sohms,  1  Wash.  Ter. 
557.) 

Right  of  way  for  logging  roads  and  lumbering  purposes  not  public 
use.  (Healy  Lumber  Co.  v.  Morris,  33  Wash.  490,  74  Pac.  681; 
Matthews  v.  Belfast  Mfg.  Co.,  35  Wash.  662,  77  Pac.  1046.) 

Toll-logging  road  as  public  carrier  is  public  use.  (State  ex  rel.  Clark 
V.  Superior  Court,  62  Wash.  612,  114  Pac.  444.) 


§§  546,  546a    existing  corporation  laws,  1913.  390 


CO-OPERATIVE  ASSOCIATIONS. 

§  546.    Co-operative    Associations — Wlio   may    Organize — 
Purposes. 

Any  number  of  persons,  not  less  than  five,  may  associate 
themselves  together  as  a  co-operative  association,  society, 
company  or  exchange  for  the  transaction  of  any  lawful  busi- 
ness on  the  co-operative  plan.  For  the  purposes  of  this  act 
the  words  "association,"  "company,"  "exchange,"  "soci- 
ety" or  "union"  shall  be  construed  the  same.  [Laws  1913, 
c.  19,  §  1.] 

The  essential  characteristic  of  a  co-operative  association  is  that  it 
has  for  its  object  the  sharing  of  profits  with  laborers  and  wage-earners 
as  such  as  well  as  among  investors  and  stockholders.  (Finnegan  t. 
Noerenberg,  52  Minn.  238,  244,  53  N.  W.  1150.) 

Co-operative  associations  are  similar  to  joint  stock  companies.  (Chater 
T.  San  Francisco  S.  R.  Co.,  19  Cal.  219,  246.) 

Personal  liability  of  stockholder  may  be  waived  or  limited  by  agree- 
ment.     (Robinson  v.  Bidwell,  22  Cal.  379,  388.) 

Co-operative  associations  incorporated  under  statute  are  governed 
by  the  same  rules  applicable  to  voluntary  co-operative  associations  ex- 
cept so  far  as  modified  by  statute.  (Atwood  v.  Dumas,  149  Mass.  167, 
21  N.  E.  236;  McCallian  v.  Hibernia  Sav.  &  Loan  Soc,  70  Cal.  163,  12 
Pac.  114;  Mokelumne  Hill  C.  &  Min.  Co.  v.  Woodbury,  14  Cal.  424; 
Bank  v.  Bean,  124  Mass.  81;  Merrill  v.  Mclntire,  13  Gray  (Mass.), 
157;  Baxter  v.  Mclntire,  13  Gray   (Mass.),  168.) 

§  546a.    Articles — Contents. 

Every   association  formed    under  this  act  shall  prepare 
articles  of  association  in  writing,  which  shall  set  forth: 

1.  The  name  of  the  association. 

2.  The  purpose  for  which  it  was  formed. 

3.  Its  principal  place  of  business. 

4.  The  term  for  which  it  is  to  exist  which  shall  not  exceed 
fifty  years. 

5.  The  amount  of  capital  stock,  the  number  of  shares  and 
the  par  value  of  each  share.     [Laws  1913,  c.  19,  §  2.] 


391  CO-OPERATIVE  ASSOCIATIONS.  §§  546b-546d 

§  546b.  Articles — Verification — Filing — When  Legally  Or- 
ganized. 
The  original  articles  of  associations  organized  under  thia 
act  or  a  true  copy  thereof  verified  to  be  such  by  the  affidavits 
of  two  of  the  signers  thereof,  shall  be  filed  with  the  Secre- 
tary of  State.  Whenever  a  certified  copy  of  the  same  accom- 
panied by  a  certificate  of  the  Secretary  of  State  showing  that 
the  same  has  been  filed  in  his  office,  is  filed  with  the  county 
auditor  of  the  county  in  which  is  located  the  principal  place 
of  business  of  said  association,  the  said  association  shall  be 
deemed  to  be  legally  organized.     [Laws  1913,  c.  19,  §  3.] 

§  546c.     Filing  Fees. 

For  filing  articles  of  association  organized  under  this  act 
there  shall  be  paid  to  the  Secretary  of  State  the  sum  of 
twenty-five  dollars  and  for  the  filing  of  an  amendment  of 
such  articles  there  shall  be  paid  the  sum  of  ten  dollars.  For 
recording  such  articles  of  assoeiation  or  an  amendment 
thereto,  the  county  auditor  shall  charge  the  sum  of  fifteen 
cents  for  each  one  hundred  words  thereof,  and  fifteen  cents 
for  filing  and  indexing  the  same.     [Laws  1913,  c.  19,  §  4.] 

§  546d.     Trustees — Election — ^Duties — Election  of  Officers. 

Every  such  association  shall  be  managed  by  a  board  of 
not  less  than  three  trustees.  The  trustees  shall  be  elected 
by  and  from  the  stockholders  of  the  assoeiation  at  such  time 
and  for  such  term  of  office  as  the  by-laws  may  prescribe,  and 
shall  hold  office  during  the  term  for  which  they  were  elected 
and  until  their  successors  are  elected  and  qualified;  but  a 
majority  of  the  stockholders  shall  have  the  power  at  any 
regular  or  special  meeting,  legally  called  for  that  purpose 
to  remove  any  trustee  or  officer  for  cause,  and  fill  the 
vacancy.  The  officers  of  every  such  association  shall  be  a 
president,  one  or  more  vice-presidents,  a  secretary  and  a 
treasurer  who  shall  be  elected  annually  by  the  trustees. 
Each  of  said  officers  must  be  a  member  of  the  association. 
All  elections  shall  be  by  ballot.     [Laws  1913,  c.  19,  §  5.J 


§§  546e-54:6h    existing  corporation  laws,  1913.  392 

§  546e.    Amendments — How  Adopted — Recording. 

The  articles  of  association  may  be  amended  by  a  majority 
vote  of  the  stockholders  at  any  regular  stockholders'  meet- 
ing or  at  any  special  stockholders'  meeting  called  for  that 
purpose,  on  twenty  days'  written  notice  being  given  to  the 
stockholders.  Said  power  to  amend  shall  include  the  power 
to  increase  or  diminish  the  amount  of  capital  stock  and  the 
number  of  shares :  Provided,  the  amount  of  the  capital  stock 
shall  not  be  diminished  below  the  amount  of  the  paid-up 
capital  stock  at  the  time  such  amendment  is  adopted. 
Within  thirty  days  after  the  adoption  of  an  amendment  to 
its  articles  of  association,  the  association  shall  cause  a  copy 
of  such  amendment  adopted  to  be  recorded  in  the  office  of 
the  Secretary  of  State  and  of  the  county  auditor  of  the  county 
where  its  principal  place  of  business  is  located.  [Laws  1913, 
c.  19,  §  6.] 

§  546f.  Business  Authorized  to  be  Conducted  —  Lawful 
Business  Defined. 
An  association  created  under  this  act,  being  for  mutual 
welfare,  the  words  "lawful  business"  shall  extend  to  every 
kind  of  lawful  effort  for  business,  agricultural,  dairy,  mer- 
cantile, mining,  manufacturing  or  mechanical  business,  on 
the  co-operative  plan.     [Laws  1913,  c.  19,  §  7.] 

§  546g.     Stock — Issue — Limit — Vote. 

No  stockholder  in  any  such  association  shall  own  more 
than  one-fifth  of  the  stock  of  the  association,  except  as  here- 
inafter provided.  No  stockholder  at  any  meeting  shall  be 
entitled  to  more  than  one  vote.     [Laws  1913,  c.  19,  §  8.] 

§  546h.     Subscription  of  Stock  in  Other  Associations. 

At  any  regular  meeting  or  any  regularly  called  special 
meeting  at  which  at  least  a  majority  of  all  the  stockholders 
shall  be  present,  or  represented,  an  association  organized 
under  this  act  may  by  a  majority  vote  of  the  stockholders 
present  or  represented,  subscribe  for  shares  and  invest  its 
reserve  fund  or  any  part  thereof  in  the  capital  stock  of  any 
other  co-operative  association.     [Laws  1913,  c.  19,  §  9.] 


393  CO-OPERATIVE  ASSOCIATIONS.  §§  546i-54Gk 

§  5461.     Purchasing  Business  of  Other  Associations — Pay- 
ment— Stock  Issued. 

Whenever  an  association  organized  under  this  act  shall 
purchase  any  stock  of  another  association  or  the  interest  or 
any  part  thereof  of  any  person  or  persons,  firm  or  partner- 
ship engaged  in  any  lawful  business  as  defined  in  section  7 
[§  546,  ante]  of  this  act,  it  may  pay  for  the  same  in  whole  or  in 
part  by  issuing  to  the  selling  association  or  person,  firm  or  part- 
nership, shares  of  its  capital  stock  to  an  amount  which  at  par 
value,  would  equal  the  fair  market  value  of  the  stock  or 
interest  so  purchased  and  in  such  case  the  transfer  to  the 
association  of  such  stock  or  interest  so  purchased  at  such 
valuation  shall  be  equivalent  to  payment  in  cash  for  the 
shares  of  stock  so  issued.     [Laws  1913,  c.  19,  §  10.] 

§  546j.     Certificates  of  Stock— When  Held  in  Trust— Issued. 

In  case  the  cash  value  of  such  stock  or  interest  so  purchased 
exceeds  one-fifth  of  the  par  value  of  the  purchasing  associa- 
tion, the  trustees  of  the  purchasing  association  are  authorized 
to  hold  the  shares  in  excess  of  one-fifth  of  the  par  value  of 
the  purchasing  association,  in  trust  for  the  vendor  and  dis- 
pose of  the  same  to  such  person  or  persons  and  within  such 
time  as  may  be  mutually  agreed  upon  by  the  parties  in  in- 
terest, and  shall  pay  the  proceeds  thereof  as  currently  received 
to  the  former  owners  thereof.  Certificates  of  stock  shall  not 
be  issued  to  any  subscriber  until  fully  paid  for,  but  the  by- 
laws of  the  association  may  allow  subscribers  to  stock  to  vote 
as  stockholders:  Provided,  that  one-fifth  of  the  stock  sub- 
scribed for  has  been  paid  for  by  such  subscriber.  [Laws 
1913,  c.  19,  §  11.] 

§  546k.     Stockholders  may  Vote  by  Mail. 

At  any  regular,  called,  general  or  special  meeting  of  the 
stockholders,  a  written  vote  received  by  mail  from  any  absent 
stockholder  and  signed  by  him  may  be  read  in  such  meeting 
and  shall  be  equivalent  to  a  vote  of  each  of  the  stockholders 
so  signing:  Provided,  he  has  been  previously  notified  in  writ- 
ing of  the  exact  motion  or  resolution  upon  which  such  vote 


§§  5461-546n     existing  corporation  laws,  1913,  394 

is  taken  and  a  copy  of  same  is  forwarded  with  and  attached 
to  the  vote  so  mailed  by  him.     [Laws  1913,  c.  19,  §  12,] 

§  5461.     Eaming-s — Apportionment. 

The  trustees  shall  apportion  the  net  earnings  by  first  pay- 
ing dividends  on  the  paid  up  capital  stock  at  a  rate  not  ex- 
ceeding eight  per  cent  per  annum ;  then  setting  aside  not 
less  than  ten  per  cent  nor  more  than  twenty-five  per  cent  of 
the  remainder  annually  of  the  net  profits  for  a  reserve  fund 
and  the  remainder  of  said  net  profits  by  dividends  propor- 
tioned upon  the  amount  of  business  transacted  with  said  asso- 
ciation and  proportioned  upon  the  wages  and  salaries  of 
employees:  Provided,  That  nonshareholders  shall  only  be  en- 
titled to  one-half  as  much  dividends  from  said  net  profits  as 
shareholders:  And  provided  further,  That  no  dividend  shall 
be  paid  out  or  declared  on  any  business  transacted  with  the 
association  by  any  person,  persons,  firm  or  corporation  en- 
gaged in  the  buying,  selling  or  handling  of  agricultural 
products  for  profit  or  to  any  sale  to  said  association  by  any 
person  or  persons,  firm  or  corporation  engaged  as  a  wholesaler 
or  jobber  in  the  distribution  of  manufactured  products.  Divi- 
dends remaining  uncalled  for  six  months  after  the  same  have 
been  declared  shall  revert  to  the  association,  [Laws  1913, 
c.  19,  §  13.] 

§  546m.    Distribution  of  Dividends. 

The  profits  or  net  earnings  of  such  association  shall  be  dis- 
tributed to  those  entitled  thereto  at  such  time  and  in  such 
manner  not  inconsistent  with  this  act  as  its  by-laws  shall  pre- 
scribe, which  shall  be  as  often  a«  once  a  year,  [Laws  1913, 
c.  19,  §  14.] 

§  546n.    Annual  Reports— Contents— Filing. 

Every  association  organized  under  the  terms  of  this  act 
shall,  annually  on  or  before  the  1st  day  of  March  of  each  year, 
make  a  report  to  the  secretary  of  state ;  such  report  shall  con- 
tain the  name  of  the  company,  its  principal  place  of  business 
in  this  state  and  a  general  statement  as  to  its  business,  show- 
ing the  total  amount  of  business  transacted,  the  amount  of 


395  CO-OPERATIVE  ASSOCIATIONS.         §§  546o-546q 

capital  stock  subscribed  for  and  paid  in,  the  number  of  stock- 
holders, the  total  expenses  of  operation,  the  amount  of  its 
indebtedness  or  liability  and  its  profits  and  losses.  [Laws 
1913,  c.  19,  §  15.] 

§  546o.  Co-operative  Associations  Heretofore  Organized — 
May  Adopt  Provisions  of  This  Act. 
All  co-operative  associations  heretofore  organized  and  doing 
business  under  prior  statutes,  or  which  have  attempted  to  so 
organize  and  do  business  shall  have  the  benefit  of  all  the  pro- 
visions of  this  act  and  be  bound  thereby  on  filing  with  the 
Secretary  of  State  signed  and  sworn  to  by  the  president  and 
secretary,  manager  or  other  officer  managing  said  business,  to 
the  effect  that  said  co-operative  company  or  association  has  by 
a  majority  vote  of  its  stockholders  decided  to  accept  the  bene- 
fits of  and  to  be  bound  by  the  provisions  of  this  act.  No 
association  organized  under  this  act  shall  be  required  to  do  or 
perform  anything  not  specifically  required  herein  in  order 
to  become  an  association  or  to  continue  its  business  as  such. 
[Laws  1913,  c.  19,  §  16.] 

§  546p.  Use  of  Term  "Co-operative"  Limited  to  Associa- 
tions Under  This  Act. 
No  corporation  or  association  organized  or  doing  business 
for  profit  in  this  state  shall  be  entitled  to  use  the  term  "co- 
operative" as  a  part  of  its  corporate  or  other  business  name 
or  title,  unless  it  has  complied  with  the  provisions  of  this  act ; 
and  any  corporation  or  association  violating  the  provisions  of 
this  section  may  be  enjoined  from  doing  business  under  such 
name  at  the  instance  of  any  stockholder  or  any  association 
legally  organized  hereunder.     [Laws  1913,  c.  19,  §  17.] 

§  546q.     When  to  Do  Business — Liability. 

No  co-operative  association  organized  under  the  provisions 
of  this  act  shall  be  permitted  to  do  business  until  three-fourths 
of  the  capital  stock  shall  have  been  subscribed  for  and  one- 
fourth  of  the  capital  stock  of  said  association  shall  have  been 
paid  in  to  said  association.  The  liability  of  each  stockholder 
shall  be  limited  to  the  amount  remaining  unpaid  on  his  sub- 


§§  546r,  546t    existing  corporation  laws,  1913.  396 

scription  to  the  capital  stock  of  said  association.     [Laws  1913, 
c.  19,  §  18.] 

§  546r.    May  Pass  By-laws. 

Any  association  formed  under  this  act  may  pass  by-laws  to 
govern  itself  in  the  carrying  out  of  the  provisions  of  this  act 
which  are  not  inconsistent  with  the  provisions  of  this  act. 
[Laws  1913,  c.  19,  §  19.] 

§  546t.     Constitutionality. 

If  any  section  or  part  of  a  section  of  this  act  shall  for  any 
cause  be  held  unconstitutional  such  fact  shall  not  affect  the 
remainder  of  this  act.     [Laws  1913,  c.  19,  §  20.] 


4 


397  PATRONS   OF   HUSBANDRY.  §§  547,  548 


PATRONS  OF  HUSBANDRY. 

§  547.    Manner  of  Incorporating  a  Grange. 

[§  3765,  Rem.-BaL]  Any  grange  of  the  Patrons  of  Hus- 
bandry, desiring  hereafter  to  incorporate,  may  incorporate 
and  become  a  body  politic  in  this  state  by  filing  in  the  office  of 
the  Secretary  of  State,  and  in  the  office  of  the  county  auditor 
of  the  county  wherein  such  grange  holds  its  meetings  of  busi- 
ness, a  certificate  or  articles  embodying : 

1.  The  name  of  such  grange  and  the  place  of  holding  its 
meetings. 

2.  What  elective  officers  the  said  grange  will  have,  when 
such  officers  shall  be  elected ;  how  and  by  whom  the  business  of 
the  grange  shall  be  conducted  and  managed,  and  what  officers 
shall  join  in  the  execution  of  any  contract  of  such  grange  to 
give  force  and  effect  in  accordance  with  the  usages  of  the  order 
of  the  Patrons  of  Husbandry.  Such  articles  shall  be  sub- 
scribed by  the  master  of  such  grange,  attested  by  the  secre- 
tary with  the  seal  of  the  grange : 

3.  A  copy  of  the  by-laws  of  such  grange  shall  also  be  filed 
in  the  said  office  of  the  Secretary  of  State  and  the  county 
auditor  of  the  proper  county ; 

4.  The  names  of  all  such  officers  at  the  time  of  filing  the 
application,  and  the  time  for  which  they  may  be  respectively 
elected.  When  such  articles  shall  have  been  filed,  such  grange 
shall  be  a  body  politic  and  corporate,  with  all  the  incidents  of 
a  corporation,  subject,  nevertheless,  to  the  laws  now  in  force 
or  hereafter  to  be  passed  regulating  corporations.  [Laws 
1875,  §  1,  p.  97;  1  H.  C,  §  1643;  Bal.,  §  4460.] 

§  548.     Pursuits  Such  Corporation  may  Engage  in. 

[§3766,  Rem.-BaL]  Said  grange  may  engage  in  any  in- 
dustrial pursuit,  manufacturing,  mining,  milling,  wharfing, 
docking,  commercial,  mechanical,  mercantile,  building,  farm- 
ing, equipping  or  running  railroads  or  generally  engage  in 
any  species  of  trade  or  industry ;  loan  money  on  security,  pur- 
chase and  sell  on  real  estate ;  but  when  desiring  to  engage  in 


§549 


EXISTING  CORPORATION   LAWS,   1913. 


398 


either  or  any  of  the  above  pursuits,  or  industries,  said  grange 
shall  be  subject  to  all  the  conditions,  and  liabilities  imposed 
hj>  the  provisions  of  the  general  corporation  laws,  and  in  addi- 
tion to  the  conditions  to  be  performed  as  recited  in  the  last 
preceding  section,  shall  file  additional  articles  with  said  Secre- 
tary of  State,  and  the  county  auditor  of  the  proper  county, 
stating  the  object,  business,  or  industry  proposed  to  be  pur- 
sued or  engaged  in,  the  amount  of  capital  stock,  the  time  of 
its  existence,  not  to  exceed  fifty  years;  the  number  of  shares 
of  which  the  capital  stock  shall  consist,  and  price  per  share, 
and  the  names  of  officers  necessary  to  manage  said  business 
and  the  places  where  said  officers  shall  pursue  the  same. 
[Laws  1875,  §  2,  p.  97 ;  1  H.  C,  §  1644;  Bal,  §  4461.] 


§  549.     General  Rights  and  Liabilities. 

[§  3766a,  Rem.-Bal.]  As  a  business  corporation,  said 
grange,  after  having  complied  with  the  provisions  of  the  last 
preceding  section,  shall  be  to  all  intents  and  purposes  a  do- 
mestic corporation,  with  all  the  rights,  privileges,  and  immuni- 
ties allowed,  and  all  the  liabilities  imposed,  by  the  laws  of  the 
state  relating  to  corporations  engaged  in  the  same  kinds  of 
business.  [Laws  1875,  §3,  p.  98;  1  H.  C,  §1645;  Bal.,  § 
4462.] 


399  BUILDING,  LOAN  AND  SAVINGS  ASSOCIATIONS.  §  550 


BUILDING,  LOAN  AND  SAVINGS  ASSO- 
CIATIONS. 

Ad  Act  relating  to  the  orf^anization  and  to  the  management, 
regulation  and  control  of  building  and  loan  and  savings 
and  loan  associations  and  societies ;  providing  penalties 
for  the  violation  thereof;  and  repealing  sections  3601  to 
3638  inclusive  of  Remington  and  Ballinger's  Annotated 
Codes  and  Statutes  of  Washington.     [Laws  1913,  c.  110.] 

§  550.    Formation  of. 

Ten  or  more  persons,  citizens  of  the  state  of  Washington, 
may  form  a  savings  and  loan  association  or  savings  and  loan 
society  for  the  purpose  of  accumulating  the  savings  and  funds 
of  its  members  and  lending  its  shareholder  or  others  the  funds 
so  accumulated  by  making  and  acknowledging  in  quadrupli- 
cate and  by  filing  as  hereinafter  required  articles  of  incor- 
poration specifying: 

(a)  The  name  of  the  proposed  association,  which  shall 
terminate  with  the  words  "Savings  and  Loan  Association," 
or  "Savings  and  Loan  Society." 

(b)  The  city,  town  or  village  and  the  county  wherein  the 
principal  place  of  business  of  the  association  is  to  be  located 
and  which  must  be  within  the  state  of  Washington. 

(c)  The  number  of  its  directors,  which  shall  not  be  less 
than  seven  nor  more  than  fifteen.  The  first  board  of  directors 
shall  hold  office  for  a  term  to  be  specified  in  said  articles  of 
not  less  than  two,  and  not  more  than  six  months  from  the 
time  said  association  is  authorized  to  do  business. 

(d)  The  names,  occupation  and  postoffice  addresses  of  its 
first  directors. 

(e)  The  names,  occupation  and  postoffice  addresses  of  the 
subscribers  to  the  articles  of  incorporation,  and  a  statement 
of  the  number  of  shares  which  each  has  agreed  to  take.  The 
matured  value  of  the  total  number  of  shares  so  subscribed 
shall  be  at  least  $25,000.00. 

(f)  The  limit  of  capital  to  be  accumulated. 


§  550  EXISTING  CORPORATION   LAWS,   1913.  400 

(g)  The  time  of  duration  of  said  association,  whicli  shall 
not  exceed  fifty  years. 

Said  articles  shall  be  filed  in  the  first  instance  in  the  office 
of  the  state  auditor  pending  his  approval  thereof  and  of  the 
by-laws  of  said  association  as  hereinafter  provided  for. 

The  articles  of  incorporation  may  be  amended  by  a  vote  of 
at  least  two-thirds  in  number  of  the  shareholders  voting  at 
any  general  meeting,  or  by  a  special  meeting  called  for  that 
purpose,  and  a  copy  of  the  resolutions  making  said  amend- 
ment shall  be  certified  in  quadruplicate  by  the  president  and 
secretary  under  the  seal  of  said  corporation,  and  when  so  cer- 
tified shall  be  so  filed  and  kept  the  same  as  in  the  case  of 
original  articles,  and  from  the  time  of  said  filing,  said  amend- 
ment shall  have  the  same  effect  as  if  embraced  in  the  original 
articles  of  incorporation :  Provided,  however,  that  no  increase 
in  the  authorized  capital  shall  be  made  unless  three-fourths 
of  the  capital  previously  authorized  has  actually  been  issued. 
[Laws  1913,  c.  110,  §  1.     Cf.  §  3601,  Rem.-Bal.] 

"Person"  construed  to  be  individual  as  distinct  from  corporation. 
(Denny  Hotel  v.  Schram,  6  Wash.  134,  32  Pac.  1002.) 

Loans  made  contrary  to  by-laws  held  ratified.  (Blair  v.  Metropolitan 
Savings  Bank,  27  Wash.  192,  67  Pac.  609.) 

Mortgages  deposited  with  state  auditor  are  trust  fund  for  stockholders 
and  cannot  be  sold  to  third  parties.  (Trowbridge  v.  Hamilton,  18  Wash. 
686,  52rPac.  328;  Hale  v.  Stenger,  22  Wash.  516,  61  Pac.  156.) 

Contracts  by  foreign  association  not  having  complied  with  statutory 
requirements  not  void.  (Horrell  v.  Homebuilders'  Assn.,  40  Wash.  531, 
82  Pac.  889.) 

The  relation  of  stockholder  to  building  and  loan  association  is  that 
of  borrower,  and  he  is  entitled  to  have  all  payments,  whether  premiums, 
dues,  fines  or  other,  credited  on  his  loan.  (Hale  v.  Stenger,  22  Wash. 
516,  699,  61  Pac.  156,  63  Pac.  554;  United  States  S.  &  L.  Co.  v. 
Owens,  23  Wash.  790,  63  Pac.  1134;  Hopkins  v.  Hale,  23  Wash.  790, 
63  Pac.  1134;  Interstate  S.  &  L,  Assn.  v.  Cairns,  16  Wash.  215,  47  Pac. 
509;  United  States  S.  &  L.  Assn.  v.  Parr,  26  Wash.  115,  66  Pac.  109.) 

Where  a  note  and  mortgage  contain  a  provision  for  declaring  the 
entire  amount  due  on  failure  to  pay  installment  of  interest,  default  is 
not  fixed  until  the  company  elects  to  so  declare.  (United  States  S.  & 
L.  Co.  V.  Cade,  15  Wash.  38,  45  Pac.  656.) 

In  computing  amount  due  from  a  member,  the  note,  mortgage  and 
contract  of  membership  constitute  one  transaction.  (Interstate  S.  & 
L.  Assn.  V.  Knapp,  20  Wash.  225,  55  Pac.  48,  931.) 


401      BUILDING,    LOAN    AND    SAVINGS    ASSOCIATIONS.       §§551,552 

§  551.     By-laws — Approval. 

Each  association  shall  adopt  by-laws  for  its  government  and 
therein  describe  the  manner  in  which  its  business  shall  be 
transacted,  which  by-laws  shall  be  in  conformity  with  the  pro- 
visions of  this  act,  and  the  laws  of  this  state,  and  at  all  times 
be  open  to  the  inspection  of  the  state  auditor  and  the  members 
of  the  association  at  its  home  office.  All  by-laws  shall  be  sub- 
ject to  the  approval  of  the  state  auditor  before  going  into 
effect,  and  in  case  any  provision  in  such  by-laws  shall  be  con- 
trary to  the  provisions  of  this  act,  or  to  the  laws  of  this  state, 
or  be  detrimental  to  the  interests  of  the  members  of  such  or- 
ganization, or  against  public  policy,  he  may,  under  the  advice 
and  consent  of  the  attorney  general,  require  the  same  to  be 
stricken  out.  [Laws  1913,  c.  110,  §  2.  Cf.  §  3603,  Rem- 
Bal.] 

§  552.    Approval  by  State  Auditor  of  By-laws,  etc. 

Whenever  said  articles  of  incorporation  are  in  due  form 
and  regularly  executed  and  the  by-laws  have  been  duly  ap- 
proved as  above  required,  the  state  auditor  thereupon  shall 
ascertain  from  the  best  source  of  information  at  his  command 
the  responsibility,  character  and  general  fitness  of  the  incor- 
porators. If  he  shall  be  satisfied  concerning  the  several  mat- 
ters specified  above,  he  shall,  within  a  reasonable  time, 'issue 
under  his  hand  and  official  seal  a  certificate  reciting  in  sub- 
stance the  filing  in  his  office  of  the  articles  of  incorporation 
and  by-laws;  that  said  articles  and  by-laws  conform  to  all 
the  requirements  of  law ;  that  he  has  approved  the  same,  and 
that  he  verily  believes  the  incorporators  are  fit  and  proper 
to  conduct  the  business  of  a  savings  and  loan  association  as 
defined  in  this  act  and  said  by-laws.  Said  certificate  shall  be 
made  in  quadruplicate  and  attached  to  each  copy  of  the  arti- 
cles of  incorporation,  one  of  which  shall  be  retained  by  the 
state  auditor  and  the  other  three  shall  be  returned  to  the  incor- 
porators who  shall  forthwith  file  one  copy  thereof  in  the  office 
of  the  Secretary  of  State,  one  in  the  office  of  the  auditor  of 
the  county  in  which  the  chief  place  of  business  of  said  asso- 
ciation is  located,  and  the  other  shall  be  retained  by  the  asso- 
20 


§§  553-555    EXISTING  corporation  laws,  1913.  402 

elation,  whereupon  the  incorporation  of  said  association  shall 
be  deemed  complete.     [Laws  1913,  c.  110,  §  3.] 

§  553.     Oath  and  Bond  of  Officers  and  Directors. 

Each  officer  and  director,  when  appointed  or  elected,  shall 
take  an  oath  that  he  will,  so  far  as  the  duty  devolves  upon 
him,  diligently  and  honestly  administer  the  affairs  of  such 
association,  and  will  not  knowingly  violate  the  by-laws  or  any 
of  the  provisions  of  law  applicable  to  such  association. 

Each  officer  or  agent  having  the  custody  of  money  or  secur- 
ities of  an  association  shall  be  required  to  give  bond  to  such 
association  in  an  amount  to  be  determined  by  the  board  of 
directors  of  such  association  commensurate  with  his  liability. 
[Laws  1913,  c.  110,  §  4.] 

§  554.    Membership. 

The  membership  of  the  association  shall  consist  of  those  per- 
sons holding  shares  therein. 

The  by-laws  may  provide  for  an  entrance,  membership  or 
withdrawal  fee,  but  the  total  of  such  fees  shall  not  exceed  two 
dollars  upon  each  share,  and  no  other  fee,  penalties,  fines  or 
forfeitures  shall  be  charged,  except  reasonable  charges  for 
expenses  in  closing  loans,  and  for  delinquency  in  making 
payment  on  stock  and  loans. 

The  above  provision  shall  not  apply  to  dividends  which  may 
revert  to  the  association  as  provided  in  section  7  of  this  act. 
[Laws  1913,  e.  110,  §  5.] 

§  555.    Capital  Stock — Classified  Shares. 

The  capital  of  every  such  association  shall  consist  of  the 
accumulated  payments  made  by  its  members  and  dividends 
credited  thereon,  and  shall  be  represented  by  shares.  Every 
share  issued  shall  have  a  matured  value  of  one  hundred  dol- 
lars. Every  such  association  shall  be  either  permanent  or 
serial  in  character  as  provided  by  the  terms  of  its  by-laws. 
A  permanent  association  may  issue  shares  at  any  time  and 
credit  its  dividends  upon  the  passbooks  of  its  members.  A 
serial  association  may  issue  shares  in  series  and  credit  its 
dividends  equally  upon  each  share  issued  in  such  series.    No 


403  BUILDING,  LOAN  AND  SAVINGS  ASSOCIATIONS.  §  555 

shares  of  a  prior  series  shall  fee  issued  after  the  issuing  of 
shares  in  a  later  series,  when  issued  upon  the  serial  plan,  ex- 
cept at  the  book  value  at  the  last  distribution  of  profits  plus 
the  dues  and  accumulated  earnings  thereon  since  such  dis- 
tribution. Shares  which  have  not  been  transferred  to  the 
association  as  security  for  the  repayment  of  a  loan  shall  be 
called  free  shares.  Shares  that  have  been  so  transferred  shall 
be  called  pledged  shares. 

No  preferred  stock  shall  be  issued,  i.  e.,  stock  upon  which 
a  different  or  stipulated  rate  of  dividends  shall  be  guaranteed 
or  paid  before  or  regardless  of  the  amount  of  dividends  dis- 
tributed to  other  classes  of  shares,  neither  shall  any  shares 
be  issued  which  shall  be  exempt  from  bearing  their  pro  rata 
portion  of  loss :  Provided,  however,  that  nothing  herein  con- 
tained shall  be  held  to  prohibit  any  association  already  having 
reserve  stock  outstanding  from  continuing  to  have  an  equal 
amount  of  such  stock  outstanding,  and  from  issuing,  if  neces- 
sary, additional  reserve  fund  stock  so  as  to  equal  five  per  cent 
of  the  capital  as  defined  in  this  section ;  and  when  so  provided 
in  its  by-laws,  such  reserve  fund  stock  may  participate  in  all 
earnings  equitably  with  the  general  stock  and  be  chargeable 
with  all  real  estate  taken  under  foreclosure  or  otherwise  in 
the  adjustment  of  delinquent  loans  together  with  all  direct 
losses  of  whatever  nature  sustained  by  the  association  in  the 
general  course  of  business  and  in  consideration  of  such  guar- 
anty against  loss,  and  when  provided  in  the  by-laws  such  stock 
may  receive  additional  dividends,  and  such  stock  shall  not  be 
subject  to  withdrawal  until  all  other  classes  of  stock  and  all 
other  liabilities  of  the  association  shall  first  have  been  liqui- 
dated, and  any  such  association  may  agree  to  mature  its  other 
classes  of  stock  at  a  fixed  time,  providing  any  deficiency  aris- 
ing therefrom  shall  be  chargeable  only  to  such  reserve  fund 
stock. 

Any  association  may  issue  the  shares  classified  below  when 
so  provided  by  its  by-laws: 

(a)  Installment  shares  upon  which  a  regular  stipulated 
payment  of  dues  shall  be  made  at  stated  periods  expressed  in 
the  by-laws. 


§  556  EXISTING  CORPORATION  LAWS,   1913.  404 

(b)  Savings  shares,  upon  which  paj-ments  shall  be  made 
in  such  sums  and  at  such  times  as  the  holder  thereof  may  elect 
until  the  shares  reach  their  matured  value  or  are  withdrawn. 

(c)  Fully  paid  shares,  upon  which  a  single  payment 
amounting  to  one  hundred  dollars  per  share  shall  be  paid  at 
the  time  of  subscription. 

(d)  Juvenile  shares.  Any  association  may  issue  juvenile 
shares  to,  or  in  the  name  of,  any  minor  which  shall  be  held 
for  the  exclusive  right  and  benefit  of  such  minor  and  free 
from  the  control  or  lien  of  all  other  persons ;  and  the  accumu- 
lated savings  on  these  shares  together  with  the  dividends  cred- 
ited thereon  shall  be  paid  to  the  persons  in  whose  name  the 
shares  have  been  issued  and  the  receipt  or  acquittance  of  such 
minor  shall  be  valid  and  sufficient  release  and  discharge  to  the 
association  for  such  accumulated  savings,  together  with  the 
dividends  credited  thereon  or  any  party  thereof.  [Laws  1913, 
c.  110,  §  6.     Cf.  §  3626,  Rem.-Bal.] 

§  556.    Dividends. 

Profits  and  losses  shall  be  ascertained  and  distributed  semi- 
annually or  annually.  Dividends  shall  be  taken  from  the  net 
earnings  of  the  association  and,  subject  to  the  provisions  of 
section  6  [§  555,  ante]  relating  to  reserve  fund  stock  shall  be 
distributed  ratably  to  all  classes  of  shares  and  to  each  share  in 
proportion  to  the  accumulation  made  thereon :  Provided,  that 
when  stock  is  withdrawn  within  two  years  of  its  issuance,  the 
withdrawing  member  shall  receive  only  such  proportion  of  the 
dividends  as  may  be  provided  in  the  by-laws,  but  when  such 
stock  is  more  than  two  years  old,  the  withdrawing  member  shall 
receive  at  least  seventy-five  per  cent  of  the  dividends.  The 
remaining  dividends  may  revert  to  the  undivided  earnings. 
No  dividends  shall  be  credited  or  paid  except  by  a  vote  of  the 
board  of  directors  duly  entered  upon  the  minutes,  whereupon 
shall  be  recorded  the  vote  by  ayes  and  nays.  It  shall  be  law- 
ful for  the  association,  in  addition  to  the  contingent  fund  re- 
quired by  section  13  [§  562,  post]  of  this  act,  to  hold  in  its  fund 
of  undivided  earnings,  such  sum  as  the  board  of  directors  may 
from  time  to  time  deem  necessary  or  wise ;  Provided,  however, 
that  when  the  undivided  earnings,  including  the  contingent 


405  BUILDING,  LOAN  AND  SAVINGS  ASSOCIATIONS.  §  557 

fund,  exceed  fifteen  per  cent  of  the  dues  and  dividends  cred- 
ited to  members,  the  board  of  directors  shall  declare  such  extra 
dividend  in  excess  of  the  dividend  regularly  apportioned,  as 
may  be  necessary  to  distribute  among  the  shareholders  the 
accumulation  in  excess  of  such  authorized  surplus.  [Laws 
1913,  c.  110,  §  7.     Cf.  §  3627,  Rem.-Bal.] 

As  to  withdrawal  value  in  cases  of  fraud,  see  Conaway  v.  Co-opera- 
tive Home  Builders,   65   Wash.   39,   117  Pac.   716. 

§  557.     Security  for  Loans — Bonds. 

For  every  loan  made,  except  a  loan  from  one  association  to 
another,  a  note  or  bond  secured  by  first  mortgage  on  improved 
real  estate  shall  be  taken,  which  security  shall  be  conserva- 
tively worth  at  least  twice  the  value  of  the  loan.  No  mort- 
gage loan  shall  be  made  except  upon  the  report  in  writing  of 
an  appraiser  or  a  committee  of  appraisers  appointed  by  the 
board  of  directors,  which  report  shall  state  the  conservative 
value  of  the  mortgage  security.  The  directors  in  their  dis- 
cretion may  also  loan  upon  the  security  of  the  shares  in  the 
association  to  the  amount  of  ninety  per  cent  of  their  with- 
drawal value,  and  may  loan  upon  or  invest  in  bonds  of  the 
United  States  and  of  the  state  of  Washington,  and  in  such 
classes  of  bands  and  warrants  of  the  counties,  school  districts 
and  other  municipalities,  as  well  as  local  improvement  dis- 
tricts, in  this  state,  as  the  state  auditor  may  from  time  to  time 
approve.  Any  association  having  a  surplus  for  which  there 
is  no  demand  for  loaning  purposes  or  for  the  payment  of 
withdrawals  or  matured  shares,  may  loan  the  same  to  another 
domestic  association,  and  such  association  may  borrow  from 
other  associations  or  otherwise  for  loaning  purposes  or  for 
the  payment  of  withdrawals  or  matured  shares:  Provided, 
that  no  association  shall  borrow  any  amount  or  amounts  which 
in  the  aggregate  shall  exceed  twenty-five  per  cent  of  the  actual 
value  of  mortgages  on  deposit  with  the  state  auditor,  as  shown 
by  the  last  preceding  semi-annual  statement  of  the  borrowing 
associations,  as  provided  in  section  9  of  this  act. 

In  borrowing  said  amount  or  amounts  for  the  purposes 
specified,  any  such  association  may,  at  its  election,  borrow  the 
same  or  any  part  thereof  upon  its  debenture  bonds,  maturing 


§  558  EXISTING  CORPORATION  LAWS,    1913.  406 

on  or  before  five  years  after  date  and  bearing  interest  not 
exceeding  six  per  cent  per  annum,  interest  payable  semi- 
annually. In  no  case  shall  any  such  bonds  be  issued  when 
there  are  sufficient  funds  on  hand  or  receivable  in  time  to 
meet  approved  applications  for  loans  or  for  the  payment  of 
maturing  stock  or  withdrawals  of  stock.  Such  debenture 
bonds  may  be  retired  by  action  of  the  board  of  directors  at 
any  time  after  one  year  from  date  of  issue,  by  the  secretary 
of  the  association  giving  notice  in  writing  sixty  days  or  more 
prior  to  the  next  interest  date  to  the  recorded  holders  thereof, 
and  on  return  of  said  retired  bonds,  together  with  the  coupons 
attached,  said  holders  shall  receive  their  par  value.  At  the 
expiration  of  said  interest  period,  the  bonds  so  called  shall 
cease  to  draw  interest.  Whenever  the  state  auditor  shall  deem 
any  indebtedness  incurred  under  the  provisions  of  this  section 
to  be  detrimental  to  the  interests  of  the  shareholders  of  any 
such  association,  he  shall  notify  such  association  to  reduce  its 
indebtedness  to  such  amount  as  he  shall  consider  reasonable, 
giving  such  association  such  reasonable  time  as  may  be  neces- 
sary to  effect  such  reduction  of  indebtedness.  [Laws  1913, 
c.  110,  §  8.     Cf.  §  3604,  Rem.-Bal.] 

§  558.    Deposit  of  Securities. 

Every  savings  and  loan  association  heretofore  or  hereafter 
incorporated  under  the  laws  of  this  state,  and  governed  by 
this  act,  shall  deposit  and  keep  with  the  state  auditor,  or  with 
a  duly  chartered  trust  company  of  this  state,  approved  by  the 
state  auditor,  in  trust  for  all  its  members  and  creditors,  all 
mortgages  and  notes  secured  thereby,  received  by  it  in  the 
usual  course  of  business.  "When  deposited  with  a  trust 
company  such  company  shall  certify  to  the  state  auditor  the 
possession  of  such  securities,  and  the  same  shall  not  be  sur- 
rendered without  the  authority  or  sanction  of  the  state  au- 
ditor. All  associations  except  such  as  confine  their  business 
operations  wholly  to  the  county  in  which  such  associations  are 
incorporated  and  adjoining  counties,  not  having  or  owning 
mortgages  to  the  amount  of  twenty-five  thousand  dollars,  shall 
deposit  with  the  state  auditor  additional  securities  to  make 
with  the  securities  so  owned  and  deposited  a  total  value  of 


407  BUILDING,  LOAN  AND  SAVINGS  ASSOCIATIONS.  §  558 

not  less  than  twenty-five  thousand  dollars.  Such  additional 
securities  shall  consist  of  bonds  of  the  United  States  and  of 
the  state  of  Washin^^ton,  and  such  classes  of  bonds  and  war- 
rants of  the  counties,  school  districts  and  other  municipalities, 
as  well  as  local  improvement  districts,  in  said  state,  as  the 
state  auditor  may  from  time  to  time  approve,  and  such  addi- 
tional securities  may  be  withdrawn  from  time  to  time  when 
mortgage  securities  of  corresponding  value  shall  be  deposited, 
as  provided  in  this  act,  or  when  other  securities  of  like  char- 
acter are  substituted  therefor,  and  it  shall  be  the  duty  of  the 
state  auditor,  from  time  to  time,  to  examine  said  associations 
to  ascertain  whether  all  of  its  securities  are  deposited,  as  re- 
quired by  this  act:  Provided,  that  all  securities  heretofore 
taken  in  any  other  state,  territory  or  nation,  by  any  associa- 
tion organized  under  the  laws  of  this  state,  and  subject  to  the 
provisions  of  this  act,  and  there  deposited  under  the  laws  of 
such  state,  territory  or  nation,  with  some  officer,  authorized 
to  receive  the  same,  shall  not  be  deposited  with  the  auditor 
of  the  state  of  Washington.  But  in  every  such  case  a  certifi- 
cate of  such  deposit  shall  be  filed  with  the  auditor  of  this  state, 
and  renewed  annually,  together  with  a  statement  verified  by 
the  affidavit  of  some  officer  of  such  association,  who  has  knowl- 
edge of  the  facts,  show^ing  all  of  the  securities  taken  by  such 
association,  in  such  other  state,  territory  or  nation,  at  the  time 
of  the  filing  of  such  certificate;  and  in  case  any  securities 
taken  in  any  such  state,  territory  or  nation  are  not  deposited 
there,  then  the  same  shall  be  deposited  here,  as  required  by 
this  act. 

Every  foreign  association  doing  business  in  this  state  and 
governed  by  this  act  shall  deposit  and  keep  with  the  auditor 
of  this  state,  or  with  a  duly  chartered  trust  company  of  this 
state,  approved  by  the  state  auditor,  in  trust  for  all  its  mem- 
bers and  creditors  in  this  state,  all  mortgages  heretofore  re- 
ceived by  it  in  this  state  and  now  in  eft'eet,  and  all  mortgages 
hereafter  received  by  it  in  the  usual  course  of  its  business  in 
this  state.  Such  securities  shall  be  kept  and  dealt  with  by 
the  state  auditor  or  by  such  trust  company  in  like  manner 
as  the  securities  deposited  by  savings  and  loan  associations 
organized  under  the  laws  of  this  state.     Every  association 


§§559,560      EXISTING   CORPORATION    LAWS,    1913.  408 

governed  by  this  act  shall  on  or  before  the  1st  day  of  February 
and  on  or  before  the  1st  day  of  August  in  each  year,  file  with 
the  state  auditor  a  verified  statement  of  the  total  amount  due 
to  the  association  from  the  borrowers,  upon  the  mortgage  loans 
on  deposit  with  the  state  auditor  upon  respectively  the  thirty- 
first  day  of  December  and  the  thirtieth  day  of  June  last  pre- 
ceding. Payments  upon  stock  pledged  to  the  association  for 
a  loan,  which  payments  are  accumulated  for  the  purpose  of 
meeting  the  loan  at  or  prior  to  its  maturity,  shall  be  considered 
as  payments  upon  such  loan  within  the  intent  of  this  section. 
[Laws  1913,  c.  110,  §  9.     Cf.  §§  3606  and  3608,  Rtm.-Bal.] 

Mortgages  deposited  with  the  state  auditor  are  a  trust  fund  for  stock- 
holders and  cannot  be  sold  to  third  parties.  (Trowbridge  v.  Hamilton, 
18  Wash.  686,  52  Pac.  328;  Hale  v.  Stenger,  22  Wash.  516,  61  Pac.  156.) 

§  559.    Surrender  of  Securities  by  State  Auditor. 

All  interest  and  dividends  which  may  accrue  on  securities 
held  by  the  state  auditor  or  such  trust  company  as  provided 
for  herein  and  all  dues,  or  monthly  payments,  which  may  be- 
come payable  on  stock  pledged  as  security  for  loans,  the  notes 
and  mortgages  for  which  are  deposited  in  accordance  with 
the  provisions  of  this  act,  may  be  collected  and  retained  by  the 
association  depositing  such  securities  or  mortgages,  so  long  as 
such  association  remains  solvent  and  faithfully  performs  all 
contracts  with  its  members,  and  when  any  mortgage  shall  have 
been  fully  paid  to  said  association  the  same  shall  be  surren- 
dered by  said  state  auditor,  or  under  his  order,  upon  filing 
with  him  a  certificate  of  the  auditor  of  the  county  where  the 
real  estate  is  situated,  to  the  effect  that  the  satisfaction  of 
said  mortgage  has  been  filed  for  record.  Any  mortgage  upon 
which  default  has  been  made  may  be  surrendered  as  afore- 
said, upon  filing  with  the  state  auditor  an  affidavit  sworn  to 
by  the  president  and  secretary  of  the  association  owning  the 
same,  stating  that  such  mortgage  is  in  default  and  that  it  is 
withdrawn  for  the  purpose  of  foreclosure.  [Laws  1913,  c.  110, 
§  10.     Cf.  §  3607,  Rem.-Bal.] 

§  560.     Power  to  Hold  Realty. 

Any  savings  and  loan  association  may  purchase  at  any  sale, 
public  or  private,  any  real  estate  upon  which  it  may  have  a 


409      BUILDING,    LOAN    AND    SAVINGS    ASSOCIATIONS.       §§561,562 

mortgage,  judgment,  lien,  or  other  encumbrance  or  in  which 
it  may  have  any  interest,  and  may  sell,  convey,  lease  or  mort- 
gage the  same  at  pleasure  to  any  person  or  persons,  but  shall 
not  otherwise  acquire  or  deal  in  real  estate:  Provided,  that 
any  such  association  may  acquire  such  real  estate  or  a  lease- 
hold interest  therein  as  may  be  necessary  or  convenient  for 
a  location  for  the  transaction  of  its  business :  Provided  fur- 
ther, that  no  such  association  shall  use  more  than  ten  per 
cent  of  its  assets  at  any  time  in  acquiring  real  estate  for  its 
business  location:  Provided  further,  that  all  real  estate 
except  that  used  for  its  business  location  shall  be  sold  by 
said  association  within  five  years  from  and  after  the  time 
that  title  thereto  is  acquired.  [Laws  1913,  c.  110,  §  11.  Cf. 
§  3605,  Rem.-Bal.] 

§  561.     Checking  Accounts  Prohibited. 

No  savings  and  loan  association  shall  carry  any  demand, 
commercial  or  checking  account  and  no  such  association  shall 
receive  any  savings  account  or  any  sum  of  money  on  deposit 
without  issuing  shares  of  stock  for  the  same.  [Laws  1913, 
c.  110,  §  12.] 

§  562.     Contingent  Fund. 

At  each  periodical  distribution  of  profits,  unless  such  asso- 
ciation already  has  issued  paid-up  reserve  fund  stock  equal 
to  five  per  cent  of  the  amount  credited  to  members  to  which 
losses  may  be  chargeable  as  provided  in  section  6  [§  555,  ante] 
of  this  act,  the  board  of  directors  shall  reserve  and  carry  to  a 
contingent  fund,  a  sum  equal  to  at  least  five  per  cent  of  the  net 
earnings  during  the  period  since  the  last  previous  dividend  was 
declared,  until  such  contingent  fund  shall  be  equal  to  at 
least  five  per  cent  of  the  amount  credited  to  members.  The 
directors  may  at  any  time  carry  to  such  contingent  fund  any 
further  portion  of  the  undivided  earnings  that  in  their  dis- 
cretion may  seem  wise,  except  as  herein  provided.  Losses 
of  the  association  may  be  paid  therefrom,  and  whenever  the 
contingent  fund  is  reduced  below  five  per  cent  the  board  of 
directors  shall  at  each  periodical  distribution  of  profits  carry 
to  such  contingent  fund  at  least  five  per  cent  of  the  net  earn- 


§§563,564    EXISTING  corporation  laws,  1913.  410 

ings  during  the  period  since  the  last  dividend  was  declared 
until  such  contingent  fund  shall  again  be  equal  to  at  least 
five  per  cent  of  the  amount  credited  to  members.  [Laws 
1913,  c.  110,  §  13.] 

§  563.     Losses  Exceeding  Reserve  Fund. 

Whenever  the  losses  of  an  association  exceed  the  con- 
tingent fund,  or  the  reserve  fund,  if  reserve  fund  stock  has 
been  issued  as  provided  in  section  6  [§  555,  ante]  of  this  act, 
they  may  be  charged  against  the  undivided  earnings,  if  any,  and 
in  the  event  that  they  also  exceed  such  undivided  earnings,  shall 
be  charged  pro  rata  against  all  classes  of  shares  according 
to  the  withdrawal  value  thereof.     [Laws  1913,  c.  110,  §  14.] 

§  564.     Limit  of  Expense  Fund. 

The  expenses  of  such  association  shall  be  paid  from  its 
earnings,  and  no  deduction  from  dues  shall  be  made  either 
directly  or  indirectly  for  that  purpose.  No  such  association 
shall  pay  or  be  or  become  liable  to  pay  either  directly  or 
indirectly  in  the  course  of  any  calendar  year  as  salaries,  com- 
missions, fees  or  other  compensation  to  its  officers,  directors, 
auditor,  attornej^s,  agents,  clerks  and  all  other  employees 
and  for  rent,  advertising,  and  all  other  operating  expenses, 
sums  of  money  the  aggregate  of  which  shall  exceed  two  and 
one-half  per  cent  of  the  average  amount  of  assets  of  such 
association  during  such  year.  The  term  "operating  ex- 
penses" as  used  in  this  connection  shall  not  be  construed  to 
include  membership  fees,  taxes,  assessments,  repairs  or  in- 
surance on  real  estate  or  commissions  on  the  sale  of  real 
estate,  or  on  the  placing  of  loans,  or  any  interest  which  the 
association  may  have  paid  or  become  liable  to  pay,  proper 
legal  charges  for  searching  titles  or  the  preparation  of  legal 
papers,  expenses  of  foreclosure  suits  or  other  bona  fide  liti- 
gation, nor  charges  for  examinations  made  by  the  direction 
of  the  state  auditor.  The  provisions  of  this  section,  in  so 
far  as  they  limit  the  expenditure  for  expenses,  shall  not 
apply  to  any  association  whose  accumulated  capital  is  less 
than  forty  thousand  dollars:  Provided,  however,  that  the 
annual  expenses  of  every  such  latter  association  shall  not 


411  BUILDING,  LOAN  AND  SAVINGS  ASSOCIATIONS.  §  565 

exceed  a  total  of  one  thousand  dollars.  The  provisions  of 
this  section  shall  apply  as  well  to  foreign  as  to  domestic  cor- 
porations doing  business  under  the  permission  and  certificate 
of  the  state  auditor  and  said  auditor  shall  not  renew  such 
permission  or  issue  such  certificate  to  any  corporation  that 
shall  have  violated  the  provisions  of  this  section.  [Laws 
1913,  c.  110,  §  15.     Cf.  §  3631,  Rem.-Bal] 

§  565.     Withdrawals  by  Shareholders — Notice. 

Shares  shall  not  be  withdrawn  until  after  a  lapse  of  three 
months  from  the  time  of  issuance  of  such  shares  and  not 
then  except  at  the  option  of  the  association,  and  after  one 
day's  written  notice  of  intention  to  withdraw  such  shares 
shall  have  been  given  subsequent  to  the  expiration  of  such 
three  months;  but  shares  may  be  withdrawn  at  any  time 
after  one  year  from  the  time  of  issuance  and  after  one  day's 
written  notice  of  such  withdrawal  has  been  given  to  the  asso- 
ciation. The  withdrawing  shareholder  shall  be  paid  the 
amount  of  the  withdrawal  value  of  the  shares,  as  shown  by 
the  last  prior  distribution  of  profits  and  as  determined  by 
the  by-laws,  together  with  all  the  dues  paid  thereon  since 
such  distribution:  Provided,  that  upon  withdrawal  of  shares 
pledged  to  the  association  for  a  stock  loan  or  stock  loans, 
the  association  shall  first  deduct  therefrom  the  indebtedness 
due  the  association.  Withdrawals  shall  be  paid  in  the  order 
of  their  filing,  except  as  hereinafter  provided,  and  it  shall 
be  the  duty  of  the  secretary  or  other  officer  discharging  such 
duties  to  enter  upon  each  notice  the  order  and  date  of  such 
filing.  Except  as  hereinafter  provided,  not  more  than  two- 
thirds  of  the  receipts  of  the  association  in  any  month  shall 
be  applied  to  the  payment  of  withdrawals  and  matured 
shares  without  the  consent  of  the  board  of  directors.  When- 
ever an  application  for  withdrawal  shall  have  been  on  file 
or  the  payment  of  matured  shares  demanded  and  either  shall 
have  remained  unpaid  for  a  period  of  six  months,  all  the  re- 
ceipts of  the  association  in  any  mouth  from  dues,  loans 
repaid,  and  the  proceeds  of  all  other  investments,  shall,  after 
the  payment  of  expenses  and  general  indebtedness,  be  ap- 
plied toward  the  payment  of  withdrawals  and  matured  stock; 


§§566,567    EXISTING  corporation  laws,  1913.  412 

and  the  board  of  directors,  or  the  state  auditor,  in  his  dis- 
cretion, may  direct  that  withdrawals  be  paid  upon  a  ratable 
and  proportionate  basis.  After  filing  the  notice  of  with- 
drawal provided  herein,  the  withdrawing  member  shall  be 
entitled  to  the  dividends  credited  to  the  same  class  of  shares, 
until  the  final  payment  of  his  shares  is  made;  and  member- 
ship in  the  association  shall  remain  unimpaired  so  long  as 
any  accumulation  remains  to  his  credit.  No  officer,  director, 
attorney,  clerk  or  agent  of  such  association,  and  no  person 
in  any  way  interested  or  concerned  in  the  management  of 
its  affairs  shall  discount  or  directly  or  indirectly  purchase 
a  share  of  any  such  association,  whether  filed  for  withdrawal 
or  not,  except  by  payment  therefor  of  the  withdrawal  value 
of  such  share  as  determined  herein.  The  board  of  directors 
of  any  association  may  retire  all  classes  of  free  shares  by 
enforcing  withdrawals  of  the  same :  Provided,  that  the  by- 
laws shall  clearly  state  the  manner  in  which  such  with- 
drawals may  be  enforced:  And  provided  also.  That  the 
holders  thereof  shall  be  paid  the  full  value  of  the  shares,  in- 
cluding, in  such  case,  their  proportion  of  the  contingent  fund. 
[Laws  1913,  c.  110,  §  16.     Cf.  §  3627,  Rem.-Bal.] 

§  566.     Exemption  of  Shares  from  Taxation. 

Shares  held  by  members  shall  be  exempt  from  taxation  and 
the  association  itself  shall  not  be  taxable,  except  that  its 
tangible  personal  and  real  property  shall  be  taxed  as  other 
tangible  personal  and  real  property  is  taxed.  [Laws  1913, 
c.  110,  §  17.     Cf.  §  3634,  Rem.-Bal.] 

§  567.    Annual  Report — Penalty. 

On  or  before  the  first  day  of  September  in  each  year  every 
savings  and  loan  association  doing  business  in  this  state  shall 
deposit  with  the  state  auditor  a  report  of  its  affairs  and 
operations  for  the  year  ending  on  the  30th  day  of  June  im- 
mediately preceding.  Such  report  shall  be  verified  under 
oath  by  the  president  and  secretary  or  by  three  directors  of 
the  association,  and  shall  contain  such  information  as  the 
state  auditor  from  time  to  time  requests.  Upon  filing  such 
report,  there  shall  be  paid  to  the  state  auditor  for  the  state 


413  BUILDING,  LOAN  AND  SAVINGS  ASSOCIATIONS.  §  568 

general  fund,  in  lieu  of  all  other  corporation  fees  or  licenses, 
a  fee  determined  as  follows:  If  the  assets  of  the  association 
as  shown  by  said  report  amount  to  fifty  thousand  dollars  or 
less,  a  fee  of  ten  dollars ;  if  more  than  fifty  thousand  dollars 
and  less  than  one  hundred  thousand  dollars  a  fee  of  twenty 
dollars;  if  more  than  one  hundred  thousand  dollars  and  less 
than  two  hundred  fifty  thousand  dollars,  a  fee  of  thirty  dol- 
lars; if  more  than  two  hundred  fifty  thousand  dollars  and 
less  than  five  hundred  thousand  dollars,  a  fee  of  forty  dol- 
lars; if  more  than  five  hundred  thousand  dollars  and  less 
than  one  million  dollars,  a  fee  of  sixty  dollars ;  and  if  more 
than  one  million  dollars,  a  fee  of  one  hundred  dollars.  If 
such  association  shall  fail  to  furnish  to  the  auditor  of  the 
state  any  report  required  by  this  act,  at  the  time  so  required, 
it  shall  forfeit  the  sum  of  twenty-five  dollars  per  day  for 
every  day  such  report  shall  be  delayed  or  withheld ;  and  an 
action  shall  be  started  in  the  name  of  the  state  to  recover 
such  penalty  and  the  same  shall  be  paid  into  the  treasury 
of  the  state.  After  receiving  such  report,  the  auditor,  if 
satisfied  that  such  association  has  complied  with  all  the  pro- 
visions of  this  act  and  is  entitled  to  do  business  in  this  state, 
shall  issue  a  certificate  stating  the  compliance  with  such  pro- 
visions, and  that  such  association  is  entitled  to  do  business 
in  this  state,  which  certificate  shall  be  in  force  for  the  period 
of  one  year  unless  sooner  revoked.  [Laws  1913,  c.  110,  §  18. 
Cf.  §  3618,  Rem.-Bal.] 

§  568.    Supervision  by  State  Auditor. 

The  state  auditor  shall  have  supervision  of  all  such  asso- 
ciations doing  business  in  this  state,  and  shall  be  charged 
with  the  execution  of  the  laws  of  this  state  relating  thereto. 
At  least  annually  but  not  oftener  than  twice  a  year  except 
in  cases  of  extreme  necessity  he  shall  make  or  cause  to  be 
made  an  examination  into  the  affairs  of  all  such  associations 
doing  business  in  this  state.  Such  examinations  shall  be 
made  by  an  inspector  of  savings  and  loan  associations  to  be 
appointed  by  the  state  auditor,  and  who  shall  hold  office  dur- 
ing his  pleasure.  Such  inspector  shall  be  paid  for  the  time 
actually  spent  in  examining  the  affairs  of  any  association 


§  569  EXISTING  CORPORATION   LAWS,   1913.  414 

at  the  rate  of  eight  dollars  per  diem  and  railroad  fare.  Such 
compensation  shall  be  paid  by  the  association  and  where 
several  associations  are  examined  in  the  course  of  a  single 
trip  made  by  the  examiner,  the  railroad  fare  shall  be  equi- 
tably proportioned  by  the  state  auditor  among  the  associa- 
tions so  examined.  All  examinations  made  by  such  inspector 
shall  be  full  and  complete,  and  in  making  the  same  he  shall 
have  full  access  to,  and  may  compel  the  production  of  all 
books,  papers,  moneys,  and  records  of  the  association  under 
examination,  and  may  administer  oaths  to  and  examine  the 
officers  of  such  association  or  any  person  connected  there- 
with as  to  its  business  and  affairs,  and  any  willful  false 
swearing  shall  be  deemed  perjury  and  be  punishable  as  such: 
Provided,  whenever  by  the  laws  of  the  state  under  which 
any  foreign  association  is  organized,  annual  examinations  of 
such  association  are  required  and  are  made  pursuant  thereto, 
then  such  foreign  association  shall  not  be  examined  here- 
under: Provided,  such  foreign  association  shall  furnish  to 
the  auditor  of  this  state  annually  a  certificate  of  the  proper 
officer  of  such  other  state  that  he  has  made  an  examination 
pursuant  to  the  laws  of  such  other  state,  and  that  the  affairs 
of  such  associaion  are  in  accord  with  the  laws  of  such  other 
state :  And  provided  further,  that  the  auditor  of  this  state 
may,  whenever  he  deems  it  advisable,  cause  an  examination 
of  such  foreign  association  to  be  made  as  is  required  in  the 
case  of  associations  organized  under  the  laws  of  this  state. 
[Laws  1913,  c.  110,  §  19.     Cf.  §  3619,  Rem.-Bal.] 

§  569.     When  Attorney  General  Shall  Sue. 

Wherever  it  shall  appear  to  the  state  auditor  that  the 
affairs  of  any  savings  and  loan  association  are  in  an  unsound 
condition  or  that  it  is  conducting  its  business  in  an  unsafe 
or  unlawful  manner,  the  state  auditor  shall  at  once  notify 
the  board  of  directors  of  such  association,  giving  them 
twenty  days  in  which  to  restore  its  affairs  to  a  safe  and 
sound  condition  or  to  discontinue  its  illegal  practices.  If 
after  twenty  days  such  restoration  shall  not  have  been  made, 
or  such  illegal  practices  shall  not  have  been  discontinued, 
the  state  auditor  shall  direct  the  inspector  of  savings  and 


415  BUILDING,  LOAN  AND  SAVINGS  ASSOCIATIONS.  §  570 

loan  associations  to  take  possession  of  all  books,  records  and 
assets  of  every  description  of  such  association  and  hold  and 
retain  the  possession  of  same  pending  the  further  proceed- 
ings herein  specified.  Should  the  board  of  directors,  secre- 
tary or  person  in  charge  of  such  association  refuse  to  permit 
the  said  inspector  to  take  possession  as  aforesaid,  the  state 
auditor  shall  communicate  such  fact  to  the  attorney  gen- 
eral, whereupon  it  shall  become  the  duty  of  the  attorney 
general  at  once  to  institute  such  proceedings  as  may  be  neces- 
sary to  place  such  inspector  in  immediate  possession  of  the 
property  of  such  association.  Upon  taking  possession  of  the 
effects  of  the  association  as  aforesaid  said  inspector  shall 
prepare  a  full  and  true  statement  of  the  affairs  and  condi- 
tion of  such  association,  including  an  itemized  statement  of 
its  assets  and  liabilities,  and  shall  receive  and  collect  all 
debts,  dues  and  claims  belonging  to  it  and  pay  the  imme- 
diate and  reasonable  expenses  of  his  trust.  Said  inspector 
shall  be  required  to  execute  to  the  state  auditor  a  good  and 
sufficient  bond  in  a  sum  required  by  the  state  auditor  condi- 
tioned upon  the  faithful  discharge  of  his  duties  as  custodian 
of  such  association,  which  said  bond  shall  be  approved  by 
the  state  auditor,  and  the  expense  of  which  shall  be  borne 
by  the  association  under  examination. 

When  the  condition  of  such  association  has  been  fully  as- 
certained, and  it  shall  appear  that  the  affairs  of  said  asso- 
ciation are  in  fact  in  an  unsound  condition,  or  that  it  is  in 
fact  continuing  its  business  in  an  unsafe  or  unlawful  man- 
ner, the  state  auditor  shall  report  the  facts  to  the  attorney 
general  and  it  shall  thereupon  become  the  duty  of  the  attor- 
ney general  to  institute  proceedings  in  the  superior  court  of 
the  proper  county  for  the  appointment  of  a  receiver  and  for 
the  dissolution  of  such  association,  or  such  other  proceedings 
as  the  occasion  may  require.  [Laws  1913,  c.  110,  §  20,  Cf. 
§  3620,  Rem.-Bal.] 

§  570.    Foreign  Corporation  Failing  to  Comply  With  Act 
Forfeits  Rights. 
Any  savings  and  loan  association  organized  under  the  laws 
of  any  other  state  or  territory  that  shall  remove  any  action 


§§571,572      EXISTING   CORPORATION    LAWS,    1913.  416 

that  shall  be  commenced  against  it  in  a  court  of  this  state 
to  a  United  States  court,  or  that  shall  fail  to  pay  any  judg- 
ment rendered  against  it  upon  a  suit  in  any  court  in  this 
state  within  sixty  days  after  the  rendition  of  final  judg- 
ment in  such  case,  or  that  shall  fail  to  make  reports  to  the 
state  auditor  as  provided  in  this  act,  or  to  do  any  other  act 
to  be  done  or  performed  as  required  by  law,  and  after  the 
continued  failure  to  do  such  act  for  twenty  days  after  notice 
in  writing  from  the  state  auditor  of  such  failure,  shall  have 
no  right  or  authority  to  do  or  transact  any  further  business 
within  the  limits  of  this  state,  and  the  state  auditor  shall 
thereupon  cause  notice  of  the  termination  of  such  authority 
to  do  business  to  be  mailed  to  such  association,  and  to  be 
published  in  some  newspaper  of  general  circulation  at  the 
capital  of  the  state,  and  shall  communicate  the  facts  to  the 
attorney  general  of  this  state,  who  shall  institute  such  pro- 
ceedings in  the  matter  as  the  case  may  require :  Provided, 
any  such  corporation  may  be  again  authorized  to  commence 
business  upon  such  terms  as  the  state  auditor  may  deem  just 
and  proper,  and  upon  full  compliance  with  the  provisions 
of  this  act.     [Laws  1913,  c.  110,  §  21.     Cf.  §  3614,  Rem.-Bal.} 

§  571.    Doing  Business  Without  Authority. 

Any  officer,  director  or  agent  of  any  savings  and  loan 
association  or  any  other  person  who  shall  sell  or  issue  or 
knowingly  cause  to  be  sold  or  issued  to  any  resident  of  this 
state,  any  stock  of  said  association  while  said  association 
does  not  have  on  deposit  with  the  state  auditor  as  required 
by  this  act,  securities  of  the  value  and  at  the  time  herein 
prescribed,  or  while  such  association  shall  not  have  the  cer- 
tificate of  the  state  auditor  authorizing  it  to  do  business  as 
herein  prescribed  shall  be  guilty  of  a  gross  misdemeanor. 
[Laws  1913,  c.  110,  §  22.     Cf.  §  3623,  Rem.-Bal] 

§  572.     Compliance  With  Present  Law. 

After  the  passage  and  approval  of  this  act,  it  shall  be 
unlawful  for  any  person,  association  or  persons  or  domestic 
associations  not  already  organized  and  doing  business  under 
sections  3601  to  3638,  both  inclusive,  of  Remington  and  Bal- 
linger's  Annotated  Codes  and  Statutes  of  Washington,  to 


417      BUILDING,    LOAN    AND    SAVINGS    ASSOCIATIONS.       §§  573-575 

conduct  a  business  in  the  form  or  of  a  character  similar  to 
that  authorized  by  this  act  without  first  incorporating  under 
this  act.  After  the  passage  and  approval  of  this  act  no 
foreign  association  not  already  lav^^fully  engaged  in  the 
state  of  Washington  in  the  business  of  a  savings  and  loan 
association  shall  be  permitted  to  conduct  such  a  business  in 
this  state,  and  hereafter  no  savings  and  loan  associations 
organized  under  the  laws  of  this  state  not  already  lawfully 
engaged  in  the  business  of  a  savings  and  loan  association 
outside  of  the  state  of  Washington  shall  be  permitted  to 
engage  in  business  outside  of  this  state :  Provided,  that  no 
such  association  shall  loan  on  property  outside  of  this  state 
more  than  the  aggregate  of  the  amount  from  time  to  time 
standing  to  the  credit  of  members  outside  of  the  state. 
[Laws  1913,  c.  110,  §  23.     Cf.  §  3608,  Rem.-Bal.] 

§  573.    Advertisements. 

It  shall  be  unlawful  for  any  savings  and  loan  association 
to  make,  publish,  or  circulate  any  advertisement,  sign,  cir- 
cular or  statement  intended  or  calculated  to  induce  persons 
to  purchase  stock  of  such  association  in  the  belief  that  such 
stock  is  subject  to  withdrawal  on  demand  or  that  a  stipu- 
lated or  agreed  rate  of  interest  or  dividend  is  payable 
thereon,  except  as  provided  in  section  6  [§  555,  ante].  [Laws 
1913,  c.  110,  §  24.] 

§  574.    Names. 

After  the  passage  and  approval  of  this  act,  no  person, 
association  of  persons,  or  corporation  conducting  a  business 
not  in  the  form  and  of  a  character  similar  to  that  authorized 
by  this  act  shall  have  or  continue  to  use  for  a  part  of  its 
title  or  corporate  name  any  combination,  of  two  or  more 
of  the  following  words,  to  wit:  "building,"  "savings," 
"  loan, "  " home, "  "  association, "  or  "  society. ' '  [Laws  1913, 
c.  110,  §  25.     Cf.  §  3602,  Rem.-Bal.] 

§  575.    Act  Applies  to  Present  Companies. 

The  powers,  rights,  duties,  privileges  and  obligations  of 
every    association   heretofore    or   hereafter    organized    and 
27 


§§  576,  577    EXISTING  corporation  laws,  1913.  418 

doing  business  in  the  form  or  of  a  character  similar  to  that 
authorized  by  this  act,  shall  be  governed,  controlled,  con- 
strued, extended,  limited  and  determined  by  the  provisions 
of  this  act,  to  the  same  extent  and  effect  as  if  said  associa- 
tion had  been  organized  and  incorporated  under  or  pursuant 
to  the  provisions  of  this  act,  and  the  articles  of  incorpora- 
tion, by-laws,  and  rules  of  every  such  association  heretofore 
made  or  existing  are  hereby  modified,  altered  and  amended 
to  conform  with  the  provisions  of  this  act  and  the  same  are 
declared  void  where  such  articles  of  incorporation,  by-laws 
or  rules  are  inconsistent  with  the  provisions  of  this  act; 
except  that  the  obligations  of  any  existing  association, 
whether  between  such  association  and  its  shareholders  or 
any  one  of  them  or  any  other  person  or  persons  or  any  valid 
contract  between  the  shareholders  of  such  association  exist- 
ing at  the  time  this  act  takes  effect  shall  not  be  in  any  way 
impaired  by  the  provisions  of  this  act ;  and  with  such  excep- 
tions every  savings  and  loan  association  shall  possess  the 
powers,  rights,  duties  and  privileges,  and  be  subject  to  the 
obligations,  restrictions  and  liabilities  conferred  and  im- 
posed by  this  act,  notwithstanding  anything  to  the  contrary 
in  its  articles  of  incorporation,  by-laws  or  rules.  All  obli- 
gations to  any  such  association  heretofore  contracted  shall 
be  enforceable  by  it  and  in  its  name,  and  demands,  claims  and 
rights  of  action  against  any  such  association  may  be  enforced 
against  it  as  fully  and  completely  as  they  might  have  been 
enforced  before.  [Laws  1913,  c.  110,  §  26.  Cf.  §  3633,  Rem.- 
Bal.] 

§  576.    Penalty  for  Violations. 

Every  officer,  director,  agent  or  other  employee  of  any 
savings  and  loan  association,  who  shall  willfully  violate  or 
fail  to  comply  with  any  of  the  provisions  of  this  act,  shall 
be  guilty  of  a  misdemeanor,     [Laws  1913,  c.  110,  §  27.] 

§  577.    Acts  Repealed. 

Sec.  28.  Sections  3601  to  3638  inclusive  of  Remington  and 
Ballinger's  Annotated  Codes  and  Statutes  of  Washington, 


419  BUILDING,  LOAN  AND  SAVINGS  ASSOCIATIONS.  §  577 

and  all  acts  and  parts  of  acts  in  conflict  herewith,  are  hereby 
repealed. 

Sec.  29.     This  act  shall  take  effect  July  first,  1913. 

Passed  the  House  February  14,  1913. 

Passed  the  Senate  March  12,  1913. 

Approved  by  the  Governor  March  19,  1913. 


§  588  EXISTING  CORPORATION  LAWS,   1913.  420 


TRUST  COMPANIES. 

(Also  see  State  Banking  Law  following  this  Act.) 

§  588.    Formation  of  Company. 

[§  3346,  Rem.-Bal.]  Seven  or  more  persons  of  full  age 
may  become  a  trust  company  on  the  terms  and  conditions  and 
subject  to  the  liabilities  prescribed  in  this  act;  the  name  of 
every  company  formed  under  this  act  shall  contain  the  word 
"trust,"  but  shall  not  be  that  of  any  other  existing  corpora- 
tion of  this  state ;  the  capital  stock  of  such  trust  company  here- 
after organized  shall  not  be  less  than  one  hundred  thousand 
dollars :  Provided,  that  in  cities  having  less  than  25,000  inhabi- 
tants such  companies  may  be  organized  with  $50,000  capital, 
and  in  cities  having  less  than  10,000  inhabitants  such  com- 
panies may  be  organized  with  $25,000  capital,  and  shall  be 
divided  into  shares  of  one  hundred  dollars  each,  all  of  which 
shall  be  paid  in  cash  before  any  trust  company  shall  be  au- 
thorized to  transact  any  business,  and  such  payment  shall  be 
certified  to  the  [Secretary  of  State]  State  Bank  Examiner  un- 
der oath  by  the  president  and  treasurer  or  secretary  of  the 
trust  company;  hereafter  no  corporation  shall  be  organized 
for  the  purpose  of  carrying  on  a  trust  company  business  in  the 
state  of  Washington  except  under  this  act,  and  no  company 
hereafter  organized  under  any  other  act  shall  use  the  word 
"trust"  as  a  part  of  its  name :  Provided,  that  this  act  shall  not 
apply  to  any  foreign  corporations  engaged  in  the  business  of 
loaning  money  on  mortgage  security  which  does  not  accept  de- 
posits or  receive  from  citizens  of  the  state  of  Washington  prop- 
erty or  money  in  trust  or  deposit  or  for  investment.  In  case 
any  foreign  corporation  whose  name  contains  the  word  "trust," 
or  whose  articles  of  incorporation  empower  it  to  do  a  tnist 
business,  desires  to  engage  in  business  of  loaning  money  on 
mortgage  security  in  this  state,  it  shall  file  in  addition  to  its 
articles  of  incorporation  or  association,  a  resolution  of  its  gov- 
erning board,  duly  attested  by  its  president  and  secretary, 
expressly  stating  that  it  will  not  receive  deposits  in  the  state 


421  TRUST   COMPANIES.  §  589 

of  Washington  or  accept  from  citizens  and  residents  of  the 
state  of  Washington  property  and  money,  or  either,  in  trust 
for  investment.     [Laws  1911,  p.  500.] 

See  Laws  1907,  section  50,  duties  of  Secretary  of  State  imposed  on 
State  Bank  Examiner. 

"Person"  construed  to  be  individual  as  distinct  from  corporation. 
(Denny  Hotel  Co.  v.  Schram,  6  Wash.  134,  32  Pac.  1002.) 

A  provision  prohibiting  use  of  word  "trust"  by  other  companies  is 
germane  to  Laws  of  1903,  page  367,  providing  for  trust  companies. 
(State  ex  rel.  Osborne  etc.  Co.  v.  Nichols,  38  Wash.  309,  80  Pac.  462.) 

After  the  passage  of  the  Laws  of  1903,  page  367,  for  trust  companies, 
a  pre-existing  company  could  not  adopt  the  word  "trust"  without  comply- 
ing with  that  act.  (State  ex  rel.  Osborne  etc.  Co.  v.  Nichols,  38  Wash. 
308,  80  Pac.  462.) 

A  foreign  corporation  with  trust  company  powers  must  comply  with 
the  trust  company  laws  of  this  state.  (State  v.  Nichols,  47  Wash.  117, 
91  Pac.  632.) 

Foreign  company  doing  business  in  this  state  must  comply  with  the 
law  here.  (Conaway  v.  Co-operative  Home  Builders,  65  Wash.  39,  117 
Pac.  716.) 

The  fact  that  a  realty  company  is  conducting  a  trust  business  con- 
trary to  the  statute  is  not  ground  for  the  appointment  of  a  receiver  in 
a  suit  by  an  individual,  since  only  the  state  can  question  the  acts  of  the 
company.  (Frost  v.  Puget  Sound  Realty  Assn.,  57  Wash.  629,  107  Pac. 
1029.) 

§  589.     Certificate  of  Organization — What  to  Show. 

[§  3347,  Rem.-Bal.]  Such  persons  shall  under  their  hands 
and  seals  execute  and  acknowledge  an  organization  certificate 
in  triplicate,  which  shall  specifically  state : 

(1)  The  name  by  which  the  corporation  shall  be  known. 

(2)  The  place  where  its  business  is  to  be  transacted. 

(3)  The  amount  of  its  capital  stock,  and  the  number  of 
shares  into  which  the  same  is  to  be  divided. 

(4)  The  name,  residence  and  postoffice  address  of  each 
member  of  the  corporation. 

(5)  The  term  of  its  existence,  not  exceeding  fifty  years. 
[Laws  1903,  §  2,  p.  368.] 

A  corporation  to  do  a  trust  business  cannot  be  formed  otherwise  than 
in  compliance  with  the  Laws  of  1903,  page  317.  (State  ex  rel.  Gorman  t. 
Nichols,  40  Wash.  437,  82  Pac.  741.) 


§  590  EXISTING  CORPORATION  LAWS,    1913,  422 

§  590.  Filing  of  Certificate — Examination  by  State  Bank 
Examiner — Publication  of  Proof. 
[§  3348,  Rem.-Bal.]  The  certificate  of  incorporation  shall 
be  acknowledged  as  required  for  deeds  of  real  estate,  and  shall 
be  recorded  in  a  book  kept  for  that  purpose  in  the  office  of  the 
county  auditor  where  the  principal  place  of  business  of  such 
trust  company  in  this  state  is  to  be  established,  and  with  the 
Secretary  of  State:  Provided,  however,  that  before  the  cor- 
poration shall  be  authorized  to  transact  business  in  this  state 
other  than  such  as  relates  to  its  formation  and  organization, 
the  [Secretary  of  State]  State  Bank  Examiner  shall  examine 
or  cause  to  be  examined,  in  order  to  ascertain  whether  the  re- 
quisite capital  of  such  corporation  has  been  fully  paid  in  cash, 
and  if  it  appears  from  such  examination  that  such  capital  stock 
has  not  been  fully  paid  in  cash,  a  certificate  of  authorization 
shall  not  be  granted  and  no  such  corporation  shall  commence 
business  until  such  certificate  of  authorization  has  been  granted ; 
but  when  it  shall  appear  to  the  [Secretary  of  State]  State 
Bank  Examiner  that  the  entire  capital  stock  has  been  paid  in, 
and  that  such  trust  company  is  lawfully  entitled  to  commence 
business  he  shall  give  to  such  company  a  certificate  under  his 
hand  and  seal  that  such  company  is  duly  and  legally  organized 
under  this  act  as  a  trust  company,  and  authorized  to  transact 
business  as  such  trust  company  in  this  state ;  the  trust  com- 
pany shall  cause  such  certificate  of  authority  of  the  [Secretary 
of  State]  State  Bank  Examiner,  issued  in  pursuance  of  this 
act,  to  be  published  once  a  week  for  at  least  four  successive 
weeks  next  after  the  issuance  thereof,  in  a  newspaper  of  gen- 
eral circulation  in  the  place  where  said  trust  company  is 
established,  and  shall  file  proof  of  such  publication  with  the 
[Secretary  of  State]  State  Bank  Examiner.  [Laws  1903, 
§  3,  p.  368.] 

See  Laws  1907,  section  50,  duties  of  Secretary  of  State  imposed  on 
State  Bank  Examiner. 

See  note  to  section  3348,  Bal.-Rem. 

A  corporation  to  do  a  trust  business  cannot  be  formed  otherwise  than 
in  compliance  with  the  Laws  of  IWS,  page  317.  (State  ex  rel.  Gorman 
V.  Nichols,  40  Wash.  437,  82  Pac.  741.) 


423  TRUST  coMP.\jsriES.  §  591 

§  591.  When  Authorized  to  Do  Business — Powers  of  Such 
Companies. 
[§  3349,  Rem.-BaL]  As  soon  as  the  certificate  of  author- 
ity is  issued  by  the  bank  examiner  as  provided  in  the  pre- 
ceding section,  the  persons  named  in  the  articles  of  incorpo- 
ration and  their  successors  shall  thereupon  and  thereby 
become  a  corporation  and  shall  have  power: 

(1)  To  act  as  the  fiscal  or  transfer  agent  of  any  state, 
municipality,  body  politic  or  corporation,  and  in  such  capa- 
city to  receive  and  disburse  money. 

(2)  To  transfer,  register  and  countersign  certificates  of 
stock,  bonds,  or  other  evidences  of  indebtedness,  and  to  act 
as  agent  of  any  corporation,  foreign  or  domestic,  for  any 
purpose  now  or  hereafter  required  by  statute  or  otherwise. 

(3)  To  receive  deposits  of  trust  moneys,  securities  and 
other  personal  property  from  any  person  or  corporation,  and 
to  loan  money  on  real  or  personal  securities,  and  to  discount 
and  negotiate  promissory  notes,  drafts,  bills  of  exchange 
and  other  evidences  of  debt;  and  to  buy,  sell  and  exchange 
coin  and  bullion. 

(4)  To  lease,  hold,  purchase  and  convey  any  and  all  real 
property  necessary  for  and  convenient  in  the  transaction 
of  its  business,  or  which  the  purposes  of  the  corporation 
may  require,  or  which  it  shall  acquire  in  satisfaction  or  par- 
tial satisfaction  of  debts  due  the  corporation  under  sales, 
judgments  or  mortgages,  or  in  settlement  or  partial  settle- 
ment of  debts  due  the  corporation  from  any  of  its  debtors. 

(5)  To  act  as  trustee  under  any  mortgage  or  bond  issued 
by  any  municipality,  body  politic  or  corporation,  and  to 
accept  and  execute  any  other  municipality  or  corporate  trust 
not  inconsistent  with  the  laws  of  this  state. 

(6)  To  accept  trusts  from,  and  execute  trusts  for,  married 
women,  in  respect  to  their  separate  property,  and  to  be  their 
agent  in  the  management  of  such  property,  or  to  transact 
any  business  in  relation  thereto. 

(7)  To  act  under  the  order,  or  appointment  of  any  court 
of  record  as  guardian,  receiver  or  trustee  of  the  estate  of 
any  minor,  and  as  depository  of  any.  moneys  paid  into  court, 


§  591  EXISTING  CORPORATION  LAWS,    1913.  424 

whether  for  the  benefit  of  any  such  minor  or  other  person, 
corporation  or  party. 

(8)  To  take,  accept  and  execute  any  and  all  such  legal 
trusts,  duties  and  powers  in  regard  to  the  holding,  manage- 
ment and  disposition  of  any  estate,  real  or  personal,  and  the 
rents  and  profits  thereof,  or  the  sale  thereof,  as  may  be 
granted  or  confided  to  it  by  any  court  of  record,  or  by  any 
person,  corporation,  municipal  or  other  authority,  and  it 
shall  be  accountable  to  [all]  parties  in  interest  for  the  faith- 
ful discharge  of  every  such  trust,  duty  or  power  which  it 
may  so  accept. 

(9)  To  take,  accept  and  execute  any  and  all  such  trusts 
and  powers  of  whatever  nature  or  description  as  may  be 
conferred  upon  or  intrusted  or  committed  to  it  by  any  person 
or  persons,  or  by  any  body  politic,  corporation  or  other  au- 
thority, by  grant,  assignment,  transfer,  devise,  bequest  or 
otherwise,  or  which  may  be  intrusted  or  committed  or  trans- 
ferred to  it  or  vested  in  it  by  order  of  any  court  of  record, 
and  to  receive  and  take  and  hold  any  property  or  estate,  real 
or  personal,  which  may  be  the  subject  of  any  such  trust. 

(10)  To  purchase,  invest  in  and  sell  stocks,  promissory 
notes,  bills  of  exchange,  bonds,  debentures  and  mortgages 
and  other  securities ;  and  when  moneys  [or  securities  for 
moneys]  are  borrowed  or  received  on  deposit,  or  for  invest- 
ment, the  bonds  or  obligations  of  the  company  may  be  given 
therefor,  but  it  shall  have  no  right  to  issue  bills  to  circulate 
as  money. 

(11)  To  be  appointed  and  accept  the  appointment  of  as- 
signee or  trustee,  under  any  assignment  for  the  benefit  of 
creditors  of  any  debtor,  made  pursuant  to  any  statute  or 
otherwise. 

(12)  To  act  under  the  order  or  appointment  of  any  court 
of  record  or  otherwise  as  receiver  or  trustee  of  the  estate 
or  property  of  any  person,  firm,  association  or  corporation. 

(13)  To  be  appointed  and  to  accept  the  appointment  of 
executor  of,  or  trustee  under,  the  last  will  and  testament, 
or  administrator  with  or  without  the  will  annexed,  of  the 
estate  of  any  deceased  person,  and  to  be  appointed  and  to 
act  as  guardian  of  the  estate  of  lunatics,  idiots,  persons  of 


425  TRUST   COMPANIES.  §  591 

unsound  mind  and  habitual  drunkards:  Provided,  however, 
the  power  hereby  granted  to  trust  companies  to  aet  as 
guardian  or  administrator,  with  or  without  the  will  annexed, 
shall  not  be  construed  to  deprive  parties  of  the  prior  right 
to  have  issued  to  them  letters  of  guardianship,  or  of  admin- 
istration, as  such  right  now  exists  under  the  laws  of  this 
state ;  and,  be  it  further  provided,  that  no  trust  company 
or  other  corporation,  organized  under  this  chapter  which 
advertises  that  it  will  furnish  legal  advice,  construct  and 
prepare  wills  or  do  other  legal  work  for  its  customers  shall 
be  permitted  to  aet  in  the  capacity  as  executor,  trustee,  as- 
signee or  otherwise  serve  in  any  fiduciary  capacity ;  any  such 
trust  company  or  other  corporation  whose  officers  or  agents 
shall  solicit  legal  business  for  and  on  behalf  of  such  trust 
company  or  corporation  shall  be  disqualified  from  acting  as 
trustee,  assignee  or  from  serving  in  any  fiduciary  capacity 
and  shall  be  ineligible  for  appointment  as  such  in  any  of  the 
courts  of  this  state. 

(14)  To  exercise  the  powers  conferred  on  and  to  carry 
on  the  business  of  a  safe  deposit  company. 

(15)  To  collect  coupons  on,  or  interest  upon,  all  manner 
of  securities  when  authorized  so  to  do  by  the  parties  deposit- 
ing the  same. 

(16)  To  receive  and  manage  any  sinking  fund  of  any  cor- 
poration, upon  such  terms  as  may  be  agreed  upon  between 
such  corporation  and  those  dealing  with  it. 

(17)  Generally  to  execute  trusts  of  every  deseription  not 
inconsistent  with  the  laws  of  this  state  or  of  the  United 
States. 

(18)  To  receive  money  on  deposit  to  be  subject  to  check 
or  to  be  repaid  in  such  manner  and  on  such  terms,  and  with 
or  without  interest,  as  may  be  agreed  upon  by  the  depositor 
and  the  said  trust  company. 

(19)  To  make  and  certify  abstracts  of  title  to  real  prop- 
erty and  to  insure  any  person  or  corporation  claiming  to 
own  or  to  have  any  interest  in  any  real  property  or  encum- 
brance thereon  by  mortgage,  lease,  lien,  contract  or  other- 
wise against  loss  by  reason  of  liens,  encumbrances  or  imper- 
fections of  title,  or  any   adverse  claim  of  title;  Provided, 


§  592  EXISTING  CORPORATION  LAWS,   1913.  426 

however,  that  no  company  organized  under  this  chapter 
shall  be  subject  to  any  other  insurance  law  of  the  state 
of  "Washington,  Provided,  further,  that  no  trust  company 
engaged  in  the  business  of  banking  shall  be  permitted  to 
do  any  of  the  acts  mentioned  in  this  subdivision.  [Laws 
1913,  c.  177;  Laws  1907,  §  1,  p.  234.] 

§  592,    Directors — Election,  Qualification  and  Term  of  Office. 

[§  3350,  Rem.-Bal.]  The  affairs  of  every  such  corporation 
shall  be  managed  and  its  corporate  powers  exercised  by  a 
board  of  directors  of  such  number,  not  less  than  seven  nor 
more  than  thirty,  as  from  time  to  time  may  be  prescribed  in 
its  by-laM^s.  No  person  can  be  a  director  who  is  not  the  holder 
of  at  least  ten  shares  of  the  capital  stock  of  the  corporation. 
The  persons  named  in  the  articles  of  incorporation  shall  con- 
stitute the  first  board  of  directors,  and  may  add  to  their  num- 
ber not  exceeding  the  limit  of  thirty,  and  shall  severally  con- 
tinue until  others  are  elected  to  fill  their  respective  places. 
Within  six  months  from  the  time  when  such  corporation  shall 
commence  business,  the  first  board  of  directors  shall  classify 
themselves  by  lot  into  three  equal  classes,  as  nearly  as  may 
be.  The  term  of  office  of  the  first  class  shall  expire  on  the 
third  Wednesday  of  January  next  following  such  classifica- 
tion ;  the  term  of  office  of  the  second  class  shall  expire  one 
year  thereafter;  and  the  term  of  office  of  the  third  class  shall 
expire  two  years  thereafter.  At  or  before  the  expiration  of 
the  term  of  the  first  class,  and  annually  thereafter,  a  number 
of  directors  shall  be  elected  equal  to  the  number  of  directors 
whose  term  will  then  expire,  who  shall  hold  office  for  three 
years,  or  until  their  successors  are  elected  and  qualified.  Such 
elections  shall  be  held  at  the  office  of  the  corporation  and  at 
such  time  and  upon  such  public  notice  not  less  than  ten  days, 
by  advertisement  in  at  least  one  newspaper  as  shall  be  pre- 
scribed in  the  by-laws.  In  case  of  failure  to  elect  any  director 
on  the  day  named,  the  directors  whose  term  of  office  does  not 
that  year  expire  may  proceed  to  elect  a  number  of  directors 
equal  to  the  number  in  the  class  whose  term  that  year  expires, 
or  such  number  as  may  have  failed  of  re-election.  The  per- 
sons so  elected,  together  with  the  directors,  whose  term  of 


427  TRUST  COMPANIES.  §§593,594 

office  shall  not  that  year  expire,  shall  constitute  the  board  of 
directors  until  another  election  shall  be  held  according  to  law. 
Vacancies  occurring  in  the  intervals  of  election  shall  be  filled 
by  the  board.  Each  director  when  appointed  or  elected  shall 
take  an  oath  that  he  will,  so  far  as  the  duty  devolves  upon  him 
diligently  and  honestly  administer  the  affairs  of  such  cor- 
poration, and  will  not  knowingly  violate,  or  willingly  permit 
to  be  violated,  any  of  the  provisions  of  law  applicable  to  such 
corporation,  and  that  he  is  the  owner  in  good  faith  and  in  his 
own  right  of  the  number  of  shares  of  stock  required  by  this 
section,  subscribed  by  him  or  standing  in  his  name  on  the 
books  of  the  corporation,  and  that  the  same  is  fully  paid,  is 
not  hypothecated  or  in  any  way  pledged  as  security  for  any 
loan  or  debt.  Such  oath  shall  be  subscribed  by  the  director 
making  it,  and  certified  by  the  officer  before  whom  it  is  taken 
and  shall  be  immediately  transmitted  to  the  [Secretary  of 
State]  State  Bank  Examiner,  and  filed  and  preserved  in  his 
office.     [Laws  1903,  §  5,  p.  371.] 

See  liaws  1907,  section  50,  re  duties  of  Secretary  of  State  imposed  on 
State  Bank  Examiner. 

§  593,     Prohibited  from  Making  Loans  to  Its  Officers. 

[§  3351,  Rem.-Bal.]  No  trust  company  now  in  existence  or 
hereafter  organized  shall  make  any  loan  to  any  officer,  stock- 
holder or  employee  from  its  trust  funds,  and  such  trust  com- 
pany shall  not  permit  any  officer,  stockholder  or  employee  to 
become  indebted  to  it  in  any  way  out  of  its  trust  funds;  any 
president,  vice-president,  director,  secretary,  treasurer,  cash- 
ier, teller,  clerk  or  agent  of  any  such  corporation  who  know- 
ingly violates  this  section,  or  who  aids  or  abets  any  officer, 
clerk  or  agent  in  any  such  violation,  shall  be  guilty  of  a  felony 
and  punished  accordingly.     (Laws  1903,  sec.  6,  p.  372.) 

§  594.    Reports — To  State  Bank  Examiner. 

[§  3352,  Rem.-Bal.]  Every  such  company  shall  make  to 
the  [Secretary  of  State]  State  Bank  Examiner  not  less  than 
two  reports  during  each  year,  according  to  the  forms  which 
may  be  prescribed  by  him,  verified  by  the  oaths  or  affirma- 
tions of  the  president  or  vice-president  and  treasurer  or  sec- 


§  595  EXISTING  CORPORATION  LAWS,   1913.  428 

retary  of  such  corporation,  and  attested  by  the  signatures  of 
at  least  three  directors ;  every  such  report  shall  exhibit  in  de- 
tail and  under  appropriate  heads  the  resources  and  liabilities 
of  the  corporation  at  the  close  of  business  at  any  day  past  spe- 
cified by  the  [Secretary  of  State]  State  Bank  Examiner,  and 
shall  be  transmitted  to  him  within  twenty  days  after  the  re- 
ceipt of  a  request  or  requisition  therefor  by  him,  and  an  ab- 
stract or  summary  of  every  such  report  in  such  form  as  shall 
be  prescribed  by  the  [Secretary  of  State]  State  Bank  Ex- 
aminer shall  be  published  by  the  trust  company  once  in  a 
newspaper  published  in  the  place  where  such  trust  company 
is  established,  and  such  proof  of  publication  shall  be  fur- 
nished as  may  be  required  by  the  [Secretary  of  State]  State 
Bank  Examiner;  such  publications  shall  be  made  within  two 
weeks  after  the  filing  of  such  report,  the  expense  thereof  to  be 
borne  by  such  trust  company;  the  [Secretary  of  State]  State 
Bank  Examiner  shall  also  have  the  power  to  call  for  special  re- 
ports from  any  trust  company  whenever  in  his  judgment  the 
same  are  necessary  to  a  full  and  complete  knowledge  of  its  con- 
ditions ;  every  such  trust  company  w^hich  fails  to  make  and 
transmit  any  report  required  under  this  section  shall  be  sub- 
ject to  a  penalty  of  one  hundred  dollars  for  each  day  after  the 
period  herein  specified  that  it  delays  to  make  and  transmit  its 
report,  to  be  sued  for  and  collected  by  the  [Secretary  of  State] 
State  Bank  Examiner  in  the  name  and  for  the  benefit  of  the 
state.     [Laws  1903,  §  7,  p.  372.] 

See  Laws  1907,  section  50,  re  duties  of  Secretary  of  State  imposed  on 
State  Bank  Examiner. 

§  595.    False  Entries,  etc.,  a  Misdemeanor. 

[§  3353,  Rem.-Bal.]  Every  director,  officer,  agent  or  clerk 
of  any  trust  company  who  willfully  and  knowingly  subscribes 
or  makes  any  false  statement  of  facts,  or  false  entries  in  the 
books  of  such  trust  company,  or  knowingly  subscribes  or  ex- 
hibits any  false  paper,  with  intent  to  deceive  any  person  au- 
thorized to  examine  as  to  the  condition  of  such  trust  company, 
or  willfully  or  knowingly  subscribes  to  or  makes  any  false  re- 
ports, shall  be  deemed  guilty  of  a  misdemeanor  and  punished 
accordingly.     [Laws  1903,  §  8,  p.  373.] 


429  TRUST  COMPANIES.  §§  596-598 

§  596.     Not  to  Loan  on  Its  Own  Stock  as  Security. 

[§  3354,  Rem.-Bal.]  No  trust  company  shall  make  any 
loan  on  the  security  of  the  shares  of  its  own  capital  stock,  nor 
be  the  purchaser  or  holder  of  any  such  shares  unless  such 
security  or  purchase  shall  be  necessary  to  prevent  loss  upon 
a  debt  previously  contracted  in  good  faith ;  and  stock  so  pur- 
chased or  acquired  shall  within  one  year  from  the  time  of  its 
purchase  be  sold  or  disposed  of  at  public  or  private  sale :  Pro- 
vided, that  nothing  in  this  section  contained  shall  apply  to 
any  loan  made  before  the  passage  of  this  act.  [Laws  1903, 
§  9,  p.  373.] 

§  597.    Deposits  for  Minors. 

[§  3355,  Rem.-Bal.]  When  any  deposit  shall  be  made  by  or 
in  the  name  of  any  minor,  the  same  shall  be  held  for  the  ex- 
■  elusive  right  and  benefit  of  such  depositor,  and  free  from  the 
control  and  lien  of  all  other  persons,  except  creditors  of  such 
minor,  and  shall  be  paid,  together  with  the  dividends  and  in- 
terest thereon,  to  the  person  in  whose  name  the  deposit  shall 
have  been  made,  and  the  receipt  of  acquittance  of  such  minor 
shall  be  a  valid  and  sufficient  release  and  discharge  for  such 
deposit,  or  any  part  thereof,  to  the  trust  company.  [Laws 
1903,  §  10,  p.  374.] 

§  598.     State  Bank  Examiner  to  Have  Supervision  Over  and 
Inspect  Same. 

[§  3356,  Rem.-Bal.]  Every  trust  company  shall  be  subject 
to  the  inspection  and  supervision  of  the  [Secretary  of  State] 
State  Bank  Examiner,  and  it  shall  be  the  duty  of  said  [Sec- 
retary of  State]  State  Bank  Examiner  either  personally  or 
by  some  person  or  persons  to  be  appointed  by  him,  whenever 
he  shall  deem  it  expedient,  or  at  the  request  of  any  such  trust 
company,  to  examine  any  such  trust  company,  and  it  shall 
be  the  duty  of  the  officers  and  employees  of  such  trust  com- 
pany to  exhibit  its  books,  securities,  records  and  accounts  to 
the  person  or  persons  authorized  by  said  [Secretary  of  State] 
State  Bank  Examiner  to  conduct  the  examination,  and  other- 
wise to  facilitate  the  same  so  far  as  it  may  be  in  their  power ; 
the  said  [Secretary  of  State]  State  Bank  Examiner,  or  any  ex- 
aminer appointed  by  him,  shall  have  pov>'er  to  examine  under 


§§599,  600       EXISTING  CORPORATION  LAWS,  1913.  430 

oath  or  affirmation  the  directors,  officers  and  employees  of  any 
such  trust  company  relative  to  its  business  and  affairs,  and  for 
that  purpose  any  such  examiner  shall  have  power  to  administer 
oaths  and  affirmations.      [Laws  1903,  §  11,  p.  374.] 

§  599.     Insolvency — State  Bank  Examiner  to  Take  Posses- 
sion— Duty  of  Attorney  General. 

[§  3357,  Rem.-Bal.]  Whenever  it  shall  appear  to  the  [Sec- 
retary of  State]  State  Bank  Examiner  from  any  report  sub- 
mitted for  examination  made  under  the  provisions  of  this  act 
that  the  affairs  of  any  trust  company  are  in  an  unsound  con- 
dition because  of  illegal  or  unsafe  investments,  or  that  its 
liabilities  exceed  its  assets,  or  that  it  is  transacting  business 
without  authority  or  in  violation  of  law,  or  that  it  is  unsafe 
or  inexpedient  for  such  trust  company  to  continue  business, 
it  shall  be  the  duty  of  the  Attorney  General,  on  notice  by  the 
[Secretary  of  State]  State  Bank  Examiner,  to  institute  such 
proceedings  against  the  trust  company  as  the  nature  of  the 
case  may  require;  if  from  any  such  examination  the  [Secre- 
tary of  State]  State  Bank  Examiner  shall  have  reason  to  con- 
clude that  any  such  trust  company  is  in  an  unsafe  or  unsound 
condition,  he  may  forthwith  take  possession  of  such  trust 
company's  property  and  business  and  retain  such  possession 
until  the  termination  of  the  action  or  proceeding  instituted  by 
the  Attorney  General,  or  until  the  appointment  of  a  receiver ; 
and  pending  such  possession  by  the  [Secretary  of  State]  State 
Bank  Examiner,  or  such  proceedings  by  the  Attorney  General, 
all  the  remedies  at  law  or  in  equity  of  any  creditor  or  stock- 
holder against  the  said  trust  company  shall  be  suspended. 
[Laws  1903,  §  12,  p.  374.] 

See  Ijaws  1907,  section  5Q,  re  duties  of  Secretary  of  State  imposed  on 
State  Bank  Examiner. 

§  600.  Refusal  to  Submit  to  Examination — Violation  of 
Law, 
[§  3358,  Rera.-Bal.]  If  any  trust  company  shall  refuse  to 
submit  its  books,  papers  and  concerns  to  the  inspection  of  the 
[Secretary  of  State]  State  Bank  Examiner  or  any  examiner 
appointed  by  him,  or  if  any  director  or  officer  thereof  shall  re- 
fuse to  submit  to  be  examined  upon  oath  touching  the  concerns 


431  TRUST    COMPANIES.  §§  601,  602 

of  such  trust  company,  the  [Secretary  of  State]  State  Bank 
Examiner  may  report  the  fact  to  the  Attorney  General,  who 
may  proceed  against  said  trust  company  as  the  nature  of  the 
case  may  require ;  if  it  shall  appear  to  the  [Secretary  of  State] 
State  Bank  Examiner  that  any  trust  company  has  violated  its 
charter  or  any  law  of  this  state  binding  upon  it,  or  is  conduct- 
ing business  in  an  unsafe  or  unauthorized  manner,  he  shall  by 
an  order  under  his  hand  and  official  seal,  addressed  to  such 
trust  company,  direct  a  discontinuance  of  such  illegal  and  un- 
safe practices,  and  conformity  with  the  requirements  of  its 
charter  and  safety  and  security  in  its  transactions;  in  case 
such  trust  company  shall  refuse  or  neglect  to  comply  with 
such  order,  the  [Secretary  of  State]  State  Bank  Examiner 
may  report  the  fact  to  the  Attorney  General,  who  may  proceed 
against  the  trust  company  as  an  insolvent  corporation.  [Laws 
1903,  §  13,  p.  375.] 

See  Laws  1907,  section  50,  re  duties  of  Secretary  of  State  imposed  on 
State  Bank  Examiner. 

§  601.    Trustees,  Executors,  etc. — Duty  as. 

[§  3359,  Rem.-Bal.]  In  all  cases  where  any  corporation  in 
this  state  authorized  by  its  charter  to  act  as  trustees,  executors, 
administrators  or  guardians,  shall  be  appointed  executor,  ad- 
ministrator or  trustee  of  any  estate  or  guardian  of  any  infant, 
it  shall  and  may  be  lawful  for  the  president,  cashier,  or  treas- 
urer of  such  corporation  to  take  and  subscribe  for  such  cor- 
poration any  and  all  oaths  or  affirmations  required  to  be 
taken  or  subscribed  by  such  executor,  administrator,  trustee 
or  guardian.     [Laws  1903,  §  14,  p.  375.] 

§  602.    Liability  of  Stockholders. 

[§  3360,  Rem.-Bal.]  If  default  shall  be  made  in  the  pay- 
ment of  any  debt  or  liability  contracted  by  such  corporation, 
the  stockholders  thereof  shall  be  individually  responsible, 
equally  and  ratably,  for  the  then  existing  debts  of  the  cor- 
poration, but  no  stockholder  shall  be  liable  for  the  debts  of  the 
corporation  to  an  amount  exceeding  the  par  value  of  the  re- 
spective shares  of  stock  by  him  held  in  such  corporation  at  the 
time  of  such  default.     [Laws  1903,  §  15,  p.  375.J 


§§  602a,  603    existing  corporation  laws,  1913.  432 

§  602a.    Liability  in  Case  of  Forged  Check. 

[§  S363,  Rem.-Bal.]  No  bank  or  trust  company  shall  be 
liable  to  a  depositor  for  the  payment  by  said  bank  or  trust 
company  of  a  forged  or  raised  cheek,  unless  within  sixty  days 
after  the  return  to  the  depositor  of  the  voucher  of  such  pay- 
ment, such  depositor  shall  notify  the  bank  or  trust  company 
that  the  check  so  paid  was  raised  or  forged.  [Laws  1907,  p. 
31,  §  1.] 

§  603.    Increase  of  Capital  Stock,  Amendments,  etc. — How 
Made. 

[§  3361,  Rem.-Bal.]  Every  trust  company  hereafter  organ- 
ized under  this  act  may  extend  its  corporate  existence,  change 
its  name,  increase  its  capital  stock,  make  such  other  and 
further  amendment,  change  or  alteration  as  may  be  desired,  or 
amend  its  charter  or  certificate  of  incorporation  in  the  man- 
ner following:  The  board  of  directors  shall  pass  a  resolution 
declaring  that  such  amendment,  change  or  alteration  is  ad- 
visable and  calling  a  meeting  of  the  stockholders  to  take  action 
thereon ;  the  meeting  shall  be  held  upon  such  notice  as  the  by- 
laws provide,  and  in  the  absence  of  such  provisions,  upon  ten 
days'  notice  in  writing,  given  personally,  or  by  mail;  if  two- 
thirds  in  interest  of  the  stockholders  shall  vote  in  favor  of 
such  amendment,  change  or  alteration,  a  certificate  thereof 
shall  be  signed  by  the  president  and  secretary  under  the  cor- 
porate seal,  acknowledged  or  proved  as  in  the  case  of  deeds 
of  real  estate,  and  such  certificate,  together  with  the  written 
assent,  in  person  or  by  proxy,  of  two-thirds  in  interest  of  such 
stockholders,  shall  be  filed  in  the  department  of  the  Secretary 
of  State,  and  upon  the  filing  of  the  same,  the  charter  or  cer- 
tificate of  incorporation  shall  be,  and  be  deemed  to  be  amended 
accordingly :  Provided,  that  the  certificate  to  be  made  and  filed 
in  pursuance  to  this  section  shall  contain  only  such  provisions 
as  it  would  be  lawful  and  proper  to  insert  in  an  original  cer- 
tificate of  incorporation  made  at  the  time  of  making  such 
amendment,  change  or  alteration ;  no  change  shall  be  made  in 
the  charter  or  certificate  of  incorporation  of  such  trust  com- 
pany whereby  the  rights,  remedies  or  security  of  existing  cred- 
itors shall  be  in  any  manner  impaired;  said  certificate  or  a 


433  TRUST  COMPANIES.  §§  603a,  604 

copy  thereof,  duly  certified  by  the  Secretary  of  State,  shall  be 
evidence  in  all  courts  and  places.     [Laws  1903,  §  16,  p.  376.] 

§  603a.    Joint  Deposits. 

[§  3364,  Rem.-Bal.]  When  a  deposit  has  been  made,  or 
shall  hereafter  be  made  in  any  bank  or  trust  company  trans- 
acting business  in  this  state  in  the  name  of  two  or  more  per- 
sons, payable  to  any  of  such  persons,  such  deposit  or  any 
part  thereof,  or  interest,  or  dividend  thereon,  may  be  paid 
to  any  of  said  persons,  vi^hether  the  others  be  living  or  not, 
and  the  receipt  or  acquittance  of  the  person  so  paid  shall  be 
a  valid  and)  sufficient  release  and  discharge  to  such  bank 
or  trust  company  for  any  payment  so  made.  [Laws  1907, 
p.  141,  §  1 ;  Laws  1913,  c.  9.] 

§  604.    Fees  to  be  Paid  Secretary  of  State  and  State  Bank 
Examiner. 
[§  3362,  Rem.-Bal.]     The  [Secretary  of  State]  State  Bank 
Examiner  shall  require  in  advance  the  following  fees : 
tFor  filing  articles  of  incorporation  or  certified  copies 
of  articles,  or  other  certificates  required  to  be  filed 

in  his  office $10.00 

tissuing  certificate  of  authority 10.00 

tFor  each  renewal  certificate  of  authority 10.00 

tFor  filing  each  semi-annual  statement  of  condition. . .   10.00 

tFor  making  any  examination  required  by  this  act 25.00 

For  furnishing  copies  of  papers  filed  in  his  office,  20 
cents  per  folio :  Provided,  that  all  fees  so  collected 
shall  be  paid  to  the  State  Treasurer. 
[Laws  1903,  sec.  17,  p.  376.] 
Filing  articles  or  certified  copy  of  articles  with  Secre- 
tary of  State $25.00 

Filing  amendments  to  original  articles,  each 10.00 

Annual  license  fee  to  July  first 15.00 

Foreign  corporation,  filing  power  of  attorney 5.00 

[Laws  1907,  p.  270.] 

tAll  fees  except  for  filing  the  articles  in  the  office  of  the  Secretary  of 
State  are  to  be  paid  to  the  State  Bank  Examiner.     (Laws  1907,  sec.  50.) 
28 


§§  605-608      EXISTING   CORPORATION   LAWS,    1913.  434 


BANKS— FORMATION  AND  REGULATION. 

§  605.    Appointment  of  Examiner. 

[§  3290,  Rem.-Bal.]  The  Governor  shall  appoint,  by  and 
with  the  advice  of  the  Senate,  a  State  Examiner  for  the  state 
of  Washington,  whose  term  of  office  shall  be  four  years,  unless 
sooner  removed,  and  until  his  successor  is  appointed  and  quali- 
fied. No  person  shall  be  appointed  to  such  office  who  shall  not 
be  at  the  time  of  his  appointment,  and  for  at  least  two  years 
previous  thereto,  a  citizen  of  the  state  of  Washington,  and  who 
has  not  had  at  least  four  years'  experience  in  the  banking 
business.  Nor  shall  any  person  be  eligible  for  such  office  who 
shall  be  at  the  time  interested  in  any  bank  as  owner,  officer, 
or  stockholder.     [Laws  1909,  §  1,  p.  692.] 

§  606.    Vacancy  in  This  Office  to  be  Filled. 

[§  3291,  Rem.-Bal.]  If  a  vacancy  shall  occur  in  the  office 
of  State  Examiner,  by  death,  resignation,  or  otherwise,  the 
same  shall  be  filled  by  appointment  of  the  Governor,  and  such 
appointee  shall  hold  office  until  the  next  ensuing  session  of 
the  legislature.     [Laws  1907,  §  2,  p.  518.] 

§  607.    Deputy  Examiners. 

[§  3292,  Rem.-Bal.]  The  State  Examiner  may  appoint  two 
deputies  and  revoke  such  appointment  at  pleasure,  who  shall 
have  the  qualifications  and  possess  the  powers,  and  perform 
the  duties  attached  by  law  to  the  office  of  the  examiner.  He 
may  also  employ  from  time  to  time  such  clerical  assistance 
as  shall  be  necessary  to  the  proper  conduct  of  his  office.  But 
in  no  case  shall  the  expenses  incident  to  the  conduct  of  the 
office  exceed  the  appropriation  provided  by  legislative  action. 
[Laws  1909,  §  2,  p.  692.] 

§  60®.    Examiner  and  Deputies  to  Give  Bond. 

[§  3293,  Rem.-Bal.]  The  State  Examiner  and  his  deputies 
shall,  each  before  entering  upon  his  office,  take  and  subscribe 
an  oath  to  faithfully  discharge  the  duties  of  his  office,  and 


435  BANKS — FORMATION  AND  REGULATION.       §§  609,  610 

shall  each  execute  to  the  state  of  Washington  a  bond  in  the 
sum  of  twenty-five  thousand  dollars,  with  some  surety  com- 
pany authorized  to  do  business  in  this  state,  to  be  approved 
by  the  Governor,  as  surety,  conditioned  that  he  will  faithfully 
and  impartially  discharge  the  duties  of  his  office  and  pay  over 
to  the  person  entitled  by  law  to  receive  it,  all  moneys  coming 
into  his  hands  by  virtue  of  his  office.  The  cost  of  such  bonds 
to  be  paid  by  the  state.     [Laws  1907,  §  4,  p.  519.] 

§  609.    Location  of  Ofl&ce. 

[§  3294,  Rem.-Bal.]  The  State  Examiner  may  maintain 
an  office  at  the  state  capitol,  and  there  shall  be,  at  his  request, 
assigned  to  him  suitable  rooms  in  the  state  capitol  building 
for  conducting  the  business  of  his  office;  but  such  office  may, 
with  the  consent  of  the  Governor,  be  maintained  at  some  other 
convenient  banking  center  in  the  state.  [Laws  1909,  §  3, 
p.  693.] 

§  610.    The  Terms  "Banking"  and  "Branch  Bank"  De- 
fined. 

[§3315,  Rem.-Bal.]  The  term  "banking"  within  the 
meaning  of  this  act  shall  mean  the  negotiations  for,  the  dis- 
counting of,  promissory  notes,  drafts,  bills  of  exchange  and 
other  evidence  of  indebtedness,  receiving  deposits,  selling 
and  buying  exchange,  coin  and  bullion,  and  loaning  money 
on  personal,  real  and  other  securities,  and  other  kindred 
financial  operations;  and  shall  also  be  construed  and  held 
to  mean  the  receiving  of  moneys  on  deposit,  or  savings 
account  subject  to  withdrawal  by  any  method  within  four 
months  from  the  opening  of  such  account  or  subject  to  with- 
drawal at  any  subsequent  time  on  less  than  one  month's  notice, 
and  shall  include  any  mutual  or  co-operative  savings  com- 
pany or  association,  or  a  trust  company,  receiving  money 
from  time  to  time  from  persons,  associations  or  corporations, 
to  be  held  subject  to  withdrawal  as  aforesaid,  whether  re- 
ceived as  a  direct  deposit  or  by  w^ay  of  payment  on  stock 
or  certificates  in  any  such  mutual  or  co-operative  associa- 
tion. The  provisions  of  this  act  shall  not  be  construed  to 
apply  to  building  and  loan  nor  savings  and  loan  associa- 


§  611  KXISTING  CORPOKATION  LAWS,    1913.  436 

tions  organized  under  or  transacting  business  conformably 
to  the  laws  of  this  state.  The  term  "bank"  as  used  in  this 
act  shall  be  taken  to  mean  and  include  every  association, 
company  or  corporation  (except  national  banks,  and  foreign 
banks  not  authorized  to  receive  deposits)  transacting  a 
banking  business  in  this  state.  The  term  "branch  bank," 
as  used  in  this  act,  shall  be  taken  to  mean  an  office  of  de- 
posit or  discount  other  than  the  bank's  principal  place  of 
business.     [Laws  1913,  c.  147,  §  1 ;  Laws  1909,  §  4,  p.  693.] 

§  611.  Provisions  Affect  All  Corporations  Receiving  De- 
posits. 
[§  3316,  Rem.-Bal.]  Any  bank,  branch  bank,  or  foreign 
bank  which  shall  receive  money  on  deposit,  whether  on 
certificate  or  subject  to  check  or  payment  on  stock  of  co- 
operative savings  associations,  or  other  method  of  demand 
withdrawal,  or  subject  to  withdrawal  by  any  method  within 
four  months  from  the  opening  of  such  account  or  subject  to 
withdrawal  at  any  subsequent  time  on  less  than  one  month's 
notice  shall  be  considered  as  doing  a  banking  business.  And 
promissory  notes,  receipts,  certificates  or  passbooks  issued 
for  money  received  on  deposit  or  for  payment  on  stock  of 
co-operative  associations  where  such  promissory  notes,  re- 
ceipts, certificates  or  passbooks  authorize  the  owner  or  holder 
to  withdraw  money  as  aforesaid  shall  be  held  to  be  certifi- 
cates of  deposit  for  the  purposes  of  this  act.  And  every  such 
corporation,  bank,  branch  bank  or  foreign  bank  receiving  de- 
posits as  herein  defined  and  provided  shall  be  subject  to  all 
the  provisions  of  this  act  and  shall  be  subject  to  the  same 
regulations,  visitations  and  control.  [Laws  1913,  c.  147,  §  2; 
Laws  1907,  §  7,  p.  519.] 

The  statutory  double  liability  of  stockholders  of  an  insolvent  bank  is 
a  trust  fund  for  the  benefit  of  creditors,  but  it  is  secondary,  i.  e.,  in  the 
nature  of  a  suretyship,  and  is  personal,  not  following  the  stock.  (Wilson 
V.  Book,  13  Wash.  676,  43  Pac.  939;  Watterson  v.  Masterson,  15  Wash. 
511,  46  Pac.  1041;  Bennett  v.  Thorne,  36  Wash.  253,  78  Pac.  936;  Shuey 
V.  Holmes,  21  Wash.  223,  57  Pac.  818;  Shuey  v.  Adair,  24  Wash.  378, 
64  Pac.  536.) 

Transfer  by  insolvent  bank  of  property  as  security  for  loan  not  fraud- 
ulent per  se.     (Roberts  v.  Wash.  Nat.  Bank,  11  Wash.  550,  40  Pac.  225.) 


437  BANKS — FORMATION   AND  REGULATION.  §  612 

General  deposit  after  insolvency  asset  for  payment  of  creditors. 
(Blake  v.  State  Sav.  Bank,  12  Wash.  619,  41  Pac.  909.) 

Individual  liability  of  officers  of  bank  for  receiving  deposit  after  in- 
solvency does  not  preclude  criminal  liability.  (State  v.  Oleson,  35  Wash. 
149,  76  Pac.  686;  State  v.  Dix,  33  Wash.  405,  74  Pac.  570.) 

Bank  having  notice  of  contract  and  having  acquiesced  therein  is  es- 
topped to  deny  agent's  authority.  (Tootle  v.  First  Nat.  Bank,  6  Wash. 
181,  33  Pac.  345;  First  Nat.  Bank  v.  Gaddis,  31  Wash.  596,  72  Pac.  460; 
Roberts  v.  Wash.  Nat.  Bank,  11  Wash.  550,  40  Pac.  225;  Rattelmiller  v. 
Stone,  28  Wash.  104,  68  Pac.  168;  Washington  Nat.  Bank  v.  Pierce,  6 
Wash.  491,  33  Pac.  972.) 

Relation  between  bank  and  depositor  that  of  debtor  and  creditor. 
(Commercial  Bank  of  Tacoma  v.  Chilberg,  14  Wash.  247,  44  Pac.  264; 
Blake  v.  State  Sav.  Bank,  12  Wash.  619,  41  Pac.  909.) 

Criminal  law  of  1893,  punishing  bank  officers  receiving  deposits  know- 
ing the  bank  to  be  insolvent,  held  applicable  to  incorporated  banks,  not 
to  private  bankers.      (State  v.  Youngbluth,  60  Wash.  383,  111  Pac.  240.) 

Under  Laws  of  1907,  page  518,  branch  banks  not  confined  to  branches 
of  foreign  banks.  (State  ex  rel.  Flumerfelt  v.  Engle,  50  Wash.  207,  96 
Pac.  1045.) 

Failure  to  repudiate  operation  of  branch  bank  within  reasonable  time 
after  knowledge  is  ratification.  (Ames  v.  Farmers  &  Mechanics'  Bank, 
48  Wash.  328,  93  Pac.  530.) 

The  bank  cashing  forged  checks  is  liable  to  the  bank  on  which  they 
are  drawn,  which  latter  negligently  in  turn  pays  the  check  but  not  chang- 
ing the  position  of  the  bank  first  cashing  the  check.  (Canadian  Bank  v. 
Bingham,  46  Wash.  657,  91  Pac.  185.) 

§  612.  Formation  of  Bankiiig  Corporations — Amount  of 
Capital  Required. 
[§  3317,  Rem.-Bal.]  Any  number  of  persons,  not  less  than 
three,  may  become  incorporated,  for  the  purpose  of  conducting 
and  carrying  on  a  general  banking  business,  and  also  to  estab- 
lish banks  to  be  known  as  savings  banks,  or  to  establish  banks 
having  departments  for  both  classes  of  business,  upon  the 
terms  and  conditions  of,  and  subject  to  the  liabilities,  pre- 
scribed in  this  act.  It  shall  be  unlawful  for  any  corporation 
to  transact  a  banking  business  unless  at  the  time  of  organiza- 
tion and  commencement  of  such  banking  business,  such  cor- 
poration has  property  of  cash  value  as  follows :  In  cities,  vil- 
lages and  communities  having  a  population  of  less  than  one 
thousand  (1,000),  ten  thousand  dollars  ($10,000)  ;  in  cities, 
villages  and  communities  having  a  population  of  one  thou- 


§  613  EXISTING  CORPORATION  LAWS,   1913.  438 

sand  (1,000)  and  less  than  two  thousand  (2,000)  inhabi- 
tants, fifteen  thousand  dollars  ($15,000)  ;  in  cities  having  a 
population  of  two  thousand  (2,000)  and  less  than  three  thou- 
sand (3,000)  inhabitants,  twenty  thousand  dollars  ($20,000)  ; 
in  cities  having  a  population  of  three  thousand  (3,000)  and 
less  than  five  thousand  (5,000)  inhabitants,  twenty-five  thou- 
sand dollars  ($25,000)  ;  in  cities  having  a  population  of  five 
thousand  (5,000)  and  less  than  ten  thousand  (10,000)  in- 
habitants, thirty  thousand  dollars  ($30,000)  ;  in  cities  having 
a  population  of  ten  thousand  (10,000)  and  less  than  twenty- 
five  thousand  (25,000)  inhabitants,  fifty  thousand  dollars 
($50,000)  ;  in  cities  having  a  population  of  twenty-five  thou- 
sand (25,000)  and  less  than  fifty  thousand  (50,000)  inhabi- 
tants, seventy-five  thousand  dollars  ($75,000)  ;  and  in  cities 
having  a  population  of  more  than  fifty  thousand  (50,000) 
inhabitants,  one  hundred  thousand  dollars  ($100,000).  Such 
property  shall  be  in  lawful  money  as  provided  in  section  12 
of  this  act:  Provided,  that  the  provisions  of  this  section  as  to 
the  amount  of  capital  shall  not  apply  to  any  bank  or  trust 
company  organized  and  doing  business  at  the  time  of  the  pas- 
sage of  this  act :  But  provided  further,  that  the  capital  stock 
of  any  bank  or  trust  company  transacting  business  in  this 
state,  organized  prior  to  the  12th  day  of  June,  1907,  shall  be 
paid  in  full  in  cash  within  five  months  from  the  date  upon 
which  this  act  shall  take  effect.  And  a  failure  to  comply  with 
the  provisions  of  this  section  shall  subject  any  such  bank  or 
trust  company  to  a  penalty  of  one  hundred  dollars  per  day 
for  each  day  of  such  failure,  and  such  penalty  may  be  col- 
lected by  suit  against  such  bank  or  trust  company  on  the 
relation  of  the  State  Examiner,  or  attorney  general.  [Laws 
1909,  §  5,  p.  693.] 

"Person"    construed    to   be    individual    as    distinct    from    corporation. 
(Denny  Hotel  Co.  v.  Schram,  6  Wash.  134,  32  Pac.  1002.) 

§  613.    Articles — ^What  to  Contain. 

[§  3318,  Rem.-Bal.]     The  persons  incorporating  shall  exe- 
cute articles  of  incorporation,  which  shall  specify:. 

1.  The  name  assumed  by  such  bank. 


439  BANKS — FORMATION  AND  REGULATION.       §§  614,  615 

2.  The  county  and  city  or  village  where  such  bank  is  to 
be  located  and  conduct  its  business. 

3.  The  nature  of  its  business,  whether  that  of  a  commercial 
bank,  savings  bank  or  both. 

4.  The  amount  of  its  capital  stock,  which  shall  be  divided 
into  shares  of  one  hundred  dollars  each. 

5.  The  period  for  which  such  bank  is  organized,  which  shall 
not  exceed  fifty  years. 

Such  articles  shall  be  acknowledged  before  any  officer  au- 
thorized by  the  laws  of  this  state  to  take  acknowledgments. 
[Laws  1907,  §  9,  p.  521.] 

§  614.    Filing  of  Articles. 

[§  3319,  Rem.-Bal.]  Such  articles  of  incorporation  shall  be 
executed  in  quadruplicate,  one  copy  of  which  shall  be  re- 
corded in  the  office  of  the  county  auditor,  in  the  county  in 
which  such  bank  is  located ;  one  filed  with  the  State  Examiner, 
one  in  the  office  of  the  Secretary  of  State,  and  one  retained 
by  the  corporation.  Such  articles,  or  duly  authenticated 
copies  thereof,  may  be  used  as  evidence  in  all  courts  of  this 
state,  for  or  against  such  bank.     [Laws  1907,  §  10,  p.  521.] 

§  615,    Power  of  Corporation. 

[§  3320,  Rem.-Bal.]  Upon  making  and  filing  the  articles 
of  incorporation  as  hereinbefore  prescribed,  such  bank  shall 
become  a  body  corporate,  and  as  such  shall  have  power: 

1.  To  adopt  and  use  a  corporate  seal. 

2.  To  have  succession  for  the  term  of  years  mentioned  in  its 
articles  of  incorporation. 

3.  To  make  contracts. 

4.  To  sue  and  be  sued,  the  same  as  a  natural  person, 

5.  To  elect  directors,  who  shall  have  power  to  appoint  such 
officers  as  may  be  necessary  or  convenient,  to  define  their 
powers  and  duties,  and  to  dismiss  them  at  pleasure,  and  shall 
also  have  general  superintendence  and  control  of  the  affairs 
of  such  corporation. 

6.  To  prescribe  by  its  stockholders  by-laws  not  inconsistent 
with  law  regulating  the  manner  in  which  its  stock  shall  be 
transferred,  its  directors  and  officers  elected  or  appointed,  its 


§§  616,  617      EXISTING   CORPORATION    LAWS,    1913.  440 

stockholders  convened,  for  general  or  special  meetings,  its 
property  transferred,  its  general  business  conducted,  and  the 
privileges  granted  to  it  by  law,  exercised  and  enjoyed. 

7.  To  exercise  by  its  board  of  directors  or  duly  authorized 
officers  or  agents,  subject  to  law,  all  such  powers  as  shall  be 
necessary  to  carry  on  the  business  of  banking,  as  defined  and 
regulated  by  this  act :  Provided,  that  no  such  bank  shall 
transact  any  business  except  such  as  is  necessarily  preliminary 
to  its  organization  until  it  has  been  authorized  by  the  State 
Examiner  to  commence  the  business  of  banking.  [Laws  1907, 
§  11,  p.  521.] 

§  616.    Payment  of  Capital  Stock. 

[§  3321,  Rem.-Bal.]  At  least  fifty  per  cent  of  the  capital 
stock  of  every  incorporated  bank  shall  be  paid  in  before  it  shall 
be  authorized  to  commence  business,  and  the  remainder  of  the 
capital  of  such  bank  shall  be  paid  in  in  lawful  money,  in 
monthly  installments  of  at  least  ten  per  cent  of  the  whole  of 
the  capital,  payable  at  the  end  of  each  succeeding  month  from 
the  time  it  shall  be  authorized  to  commence  business,  and  the 
payment  of  each  installment  shall  be  certified  to  the  State 
Examiner  under  oath  by  the  president,  cashier,  or  treasurer 
of  such  bank.     [Laws  1907,  §  12,  p.  522.] 

Directors  of  a  bank  cannot  enter  into  an  agreement  with  the  bank 
having  any  legal  validity  that  they  shall  not  be  liable  for  stock  subscrip- 
tions.     (Barto  V.  Nix,  15  Wash.  563,  46  Pac.  1033.) 

Where  a  director  and  trustee  of  a  bank  took  stock  of  the  bank  and  gave 
his  note  for  it  as  an  accommodation  to  the  bank  until  the  bank  could  sell 
the  stock,  it  being  agreed  that  he  should  not  be  liable  on  the  note,  held, 
the  bank  becoming  insolvent,  the  director  was  liable  in  an  action  brought 
by  a  receiver  of  the  bank.  (Shuey  v.  Holmes,  22  Wash.  193,  60  Pac. 
402.) 

§  617.     Stockholders  Failing  to  Pay — Stock  to  be  Sold. 

[§  3322,  Rem.-Bal.]  Where  any  stockholder,  or  his  as- 
signee, shall  fail  to  pay  any  installment  on  his  stock  when  the 
same  is  required  by  the  preceding  section  to  be  paid,  the  di- 
rectors of  such  bank  may  sell  the  stock  of  such  delinquent 
stockholder  at  public  sale,  having  first  given  the  delinquent 
stockholder  twenty  days'  notice,  personally  or  by  mail,  at  his 


441  BANKS — FORMATION  AND  REGULATION.  §  618 

last  known  address.  If  no  bidder  can  be  found  who  will  pay 
for  such  stock  the  amount  due  thereon,  with  costs  incurred, 
the  amount  previously  paid  shall  be  forfeited  to  the  bank,  and 
such  bank  stock  shall  be  sold  as  the  directors  may  order,  within 
six  months  from  the  time  of  such  forfeiture,  and  if  not  sold, 
it  shall  be  canceled  and  deducted  from  the  capital  of  the 
bank.  If  sold  before  cancellation,  any  surplus  over  the 
amount  due  on  such  stock  to  said  bank,  less  all  costs  incurred 
thereon,  with  interest  for  the  time  delinquent,  shall  be  re- 
turned to  the  original  stockholder,  his  heirs  or  assigns.  If 
such  cancellation  shall  reduce  the  capital  of  the  bank  below 
the  minimum  required  by  this  act,  the  said  capital  shall,  within 
thirty  days  thereafter,  be  increased  to  the  required  amount  by 
original  subscription,  in  default  of  which,  a  receiver  may  be 
applied  for  by  the  State  Examiner,  to  close  up  the  business 
of  the  bank.     [Laws  1907,  §  13,  p.  522.] 

Where  a  director  and  trustee  of  a  bank  took  stock  of  the  bank  and 
gave  his  note  for  it  as  an  accommodation  to  the  bank  until  the  bank  could 
sell  the  stock,  it  being  agreed  that  he  should  not  be  liable  on  the  note, 
held,  the  bank  becoming  insolvent,  the  director  was  liable  in  an  action 
brought  b7  a  receiver  of  bank.  (Shuey  v.  Holmes,  22  Wash.  193,  60  Pac. 
402.) 

§  618.    Banks  may  Commence  Business,  When. 

[§3323,  Rem.-Bal.]  When  articles  of  incorporation  are 
filed  with  the  State  Examiner  as  provided  by  this  act,  and 
the  bank  transmitting  the  same  notifies  the  State  Examiner 
that  at  least  fifty  per  cent  of  its  capital  stock  has  been  paid  in, 
and  that  such  bank  has  complied  with  the  conditions  of  this 
act,  as  required  before  the  bank-  shall  be  authorized  to  com- 
mence business,  the  examiner  shall  examine  into  the  condition 
of  such  bank,  and  if  upon  examination  it  appears  that  such 
bank  is  lawfully  entitled  to  commence  business,  give  to  such 
bank  a  certificate  under  his  hand  and  official  seal,  that  it  has 
complied  with  all  the  provisions  of  the  law,  and  is  duly  au- 
thorized to  transact  business:  Provided,  however,  that  no 
foreign  bank  or  branch  thereof,  except  foreign  banks  now 
doing  business  in  the  state  of  Washington,  shall  do  a  banking 
business  in  the  state  until  he  or  they  shall  have  furnished  to 


§  G19  EXI3TIXG  CORPORATION  LAWS,   1913.  442 

the  State  Examiner  evidence  satisfactory  to  him  that  such 
foreign  bank,  or  branch  thereof,  has  invested  in  such  foreign 
bank,  or  branch  thereof,  an  amount  of  capital  equal  to  that 
required  of  corporations  engaged  in  similar  business,  and  shall 
have  received  from  such  examiner  a  certificate  authorizing 
him  or  them  to  do  business  as  required  in  sections  8  and  12 
of  this  act  [3317,  3321,  Rem.-Bal.]  for  corporations:  Provided 
further,  no  bank  in  this  state,  or  any  officer  or  director  thereof, 
shall  hereafter  open  any  branch  bank,  or  any  office  of  deposit 
or  discount  other  than  its  principal  place  of  business,  and  no 
branch  bank  heretofore  opened  shall  be  hereafter  maintained 
unless  the  capital  of  the  bank  maintaining  the  branch  bank 
shall  be  equal  to  the  sum  required  by  section  8  of  the  act  of 
which  this  act  is  an  amendment  [3317,  Rem.-Bal.],  and  unless 
the  capital  of  said  bank  be  increased  by  the  amount  required 
by  said  section  8  [3317,  Rem.-Bal.]  for  each  and  every  such 
branch,  the  payment  of  such  increased  capital  shall  be  governed 
by  the  provisions  in  sections  12  and  13  of  the  act  of  which  this 
act  is  an  amendment  [3321,  3322,  Rem.-Bal.],  and  for  the 
maintenance  of  any  branch  bank  in  violation  of  the  provisions 
of  this  section  every  such  bank  and  every  such  officer  or  director 
shall  be  subject  to  a  penalty  in  the  sum  of  one  thousand  dollars 
for  every  week  during  which  any  such  branch  bank  shall  be  so 
maintained.  And  such  penalty  may  be  collected  by  suit 
against  such  bank,  or  officer,  or  director,  on  relation  of  the 
State  Examiner,  or  attorney  general.  [Laws  1909,  §  6,  p. 
695.] 

§  619.    Transfer  of  Shares. 

[§  3324,  Rem.-Bal.]  The  shares  of  stock  of  such  incorpo- 
rated bank  shall  be  deemed  personal  property  and  shall  be 
transferred  on  the  books  of  the  bank  in  such  a  manner  as  the 
by-laws  thereof  shall  direct.  No  bank  shall  be  the  purchaser 
of  its  own  capital  stock,  or  accept  its  capital  stock,  or  any 
part  of  it,  as  security  for  loans.  No  bank  shall  subscribe  for 
or  purchase  the  stock  of  any  other  banking  corporation. 
[Laws  1909,  §  7,  p.  696.] 


443  BANKS — FORMATION   A.ND  REQULxVTION,       §§  620-622 

§  620.     Stock  Books. 

[§  3325,  Rem.-Bal.]  A  book  shall  be  provided  and  kept  by 
every  bank  in  which  shall  be  entered  the  name  and  residence  of 
the  stockholders  thereof,  the  number  of  shares  held  by  each, 
the  time  when  such  person  became  a  stockholder,  and  also  all 
transfers  of  stock,  stating  the  time  when  made,  the  number 
of  shares,  and  by  whom  transferred.  In  all  actions,  suits  and 
proceedings,  said  book  shall  be  presumptive  evidence  of  the 
facts  therein  stated.     [Laws  1907,  §  16,  p.  524.] 

§  621.    Amendment  of  Articles  of  Incorporation. 

[§  3326,  Rem.-Bal.]  Any  bank  may  amend  its  articles  of 
incorporation,  in  any  manner  not  inconsistent  with  the  provi- 
sions of  this  act,  by  a  vote  of  its  stockholders  representing 
two-thirds  of  the  capital,  at  a  regular  meeting,  or  a  special 
meeting  duly  called  for  that  purpose.  A  certificate  of  the 
fact  and  terms  of  the  amendment  shall  be  executed  by  a  ma- 
jority of  the  directors,  and  filed  as  required  for  articles  of  in- 
corporation, but  no  increase  of  capital  stock  shall  be  valid, 
until  the  amount  thereof  shall  have  been  subscribed  and  ac- 
tually paid  in,  and  no  reduction  of  the  capital  stock  shall  be 
made  to  an  amount  less  than  is  required  in  section  8  [3317, 
Rem.-Bal.],  for  capital,  nor  be  valid,  nor  warrant  the  cancella- 
tion of  stock  certificates,  nor  diminish  the  personal  liability  of 
the  stockholders,  until  such  reduction  has  been  approved  by  the 
State  Examiner.     [Laws  1907,  §  17,  p.  524.] 

§  622.    Liability  of  Stockholders. 

[§  3327,  Rem.-Bal.]  The  stockholders  of  every  bank  shall 
be  individually  liabk,  equally  and  ratably,  and  not  one  for  an- 
other, for  the  benefit  of  the  creditors  of  such  bank,  to  the 
amount  of  their  stock  at  par  value  thereof,  in  addition  to  the 
stock  held  by  them ;  but  persons  holding  stock  as  executors,  ad- 
ministrators, guardians  or  trustees  if  such  relation  of  trust 
shall  appear  in  the  stock  certificate  and  on  the  books  of  the 
bank,  or  as  collateral  security  or  in  pledge,  shall  not  be  person- 
ally liable  as  stockholders,  but  the  assets  and  funds  in  the 
hands  of  such  trustee  constituting  the  trust,  shall  be  liable  to 
the  same  extent  as  the  testator,  intestate,  ward  or  person  inter- 


§  623  EXTSnXG  CORPORATION  LAWS,   1913.  444 

ested  in  such  funds  would  be  if  living  or  competent  to  act, 
and  the  person  pledging  such  stock  shall  be  deemed  a  stock- 
holder, and  liable  under  this  section.  Such  liability  may  be 
enforced  by  an  action  at  law  or  suit  in  equity  by  any  such 
bank  in  process  of  liquidation,  or  by  any  receiver  or  other 
person  succeeding  to  the  legal  rights  of  such  bank.  [Laws 
1907,  §  18,  p.  524.  J 

When  a  director  and  trustee  of  a  bank  took  stock  of  the  bank  and  gave 
his  note  for  it  as  an  accommodation  to  the  bank  until  the  bank  could 
sell  the  stock,  it  being  agreed  that  he  should  not  be  liable  on  the  note, 
held,  the  bank  becoming  insolvent,  the  director  was  liable  in  an  action 
brought  by  the  receiver  of  the  bank.  (Shuey  v.  Holmes,  22  Wash.  193, 
60  Pac.  402.) 

The  rule  that  stockholder's  liability  is  secondary  does  not  require  pri- 
mary assets  to  be  exhausted  before  recourse  is  had  to  the  stockholders. 
(Bennett  v.  Thome,  36  Wash.  253,  78  Pac.  936.) 

The  receiver  of  an  insolvent  corporation  is  proper  party  plaintiff  to 
enforce  stockholder's  liability.  (Childs  v.  Blethen,  40  Wash.  340,  82  Pac. 
405.) 

§  623.    Directors— Election— Term  of  OflEice. 

[§  3328,  Rem.-Bal.]  The  affairs  of  every  such  bank  shall  be 
managed  by  not  less  than  three  directors,  who  shall  be  elected 
by  the  stockholders,  and  hold  office  for  one  year,  and  until 
their  successors  are  elected  and  have  qualified.  A  majority  of 
the  board  of  directors  shall  constitute  a  quorum  for  the  trans- 
action of  business.  In  the  first  instance  the  directors  shall 
be  elected  at  a  meeting  held  before  the  bank  is  authorized  to 
do  business  by  the  State  Examiner,  and  afterward  at  the 
annual  meeting  of  the  stockholders  to  be  held  on  the  second 
Tuesday  in  January  in  each  year.  If  for  any  cause  no  elec- 
tion is  held  at  that  time,  it  may  be  held  at  an  adjourned  meet- 
ing, or  at  a  subsequent  meeting  called  for  that  purpose,  of 
which  due  notice  shall  be  given,  as  may  be  provided  in  the 
by-laws  of  such  bank.  At  all  the  meetings  of  the  stockholders, 
each  share  shall  be  entitled  to  one  vote,  and  any  stockholder 
may  vote  by  proxy  in  writing  signed  by  him.  Every  director 
must  be  the  owner  in  his  own  right  of  at  least  five  shares  of 
stock.  He  shall  take  and  subscribe  an  oath  that  he  will  faith- 
fully and  diligently  perform  the  duties  of  such  office,  and  will 


445  BANKS — FORMATION  AND  REGULATION.       §  §  624,  625 

not  knowingly  violate  or  permit  to  be  violated,  any  provisions 
of  this  act.  Such  oath  shall  be  transmitted  to  the  State  Exam- 
iner, and  filed  in  his  office.  Vacancies  in  the  board  of  direct- 
ors shall  be  filled  by  the  board,  and  directors  so  appointed 
shall  hold  office  until  the  next  election,  and  until  their  succes- 
sors shall  have  been  elected  and  qualified.  [Laws  1907,  §  19, 
p.  525.] 

§  624.     Dividends. 

[§  3329,  Rem.-Bal.]  The  directors  of  any  bank  transacting 
business  in  this  state  may  declare  a  dividend  of  so  much  of  the 
net  profits  of  the  bank,  after  providing  for  all  expenses,  inter- 
est and  taxes  accrued,  or  due  from  such  bank,  as  they  shall 
judge  expedient,  but  before  any  such  dividend  is  declared,  not 
less  than  one-tenth  of  the  net  profits  of  the  bank  for  the  pre- 
ceding half-year,  or  for  such  period  as  is  covered  by  the 
dividend,  shall  be  carried  to  a  surplus,  until  such  surplus  shall 
amount  to  twenty  per  cent  of  its  capital  stock :  Provided,  that 
accrued  and  uncollected  interest  on  the  assets  of  the  bank  shall 
not  be  distributed  as  a  part  of  its  earnings.  [Laws  1909,  §  8, 
p.  696.] 

§  625.    Banks  may  Hold  Real  Estate,  When. 

[§  3330,  Rem.-Bal.]  Any  bank  transacting  business  in  this 
state,  so  far  as  not  prohibited  by  the  constitution  of  this  state, 
may  purchase,  hold  and  convey  real  estate  for  the  following 
purposes  and  no  other : 

1.  Such  as  shall  be  necessary  for  the  convenient  transaction 
of  its  business,  including  with  its  banking  offices,  other  apart- 
ments in  the  same  building  to  rent  as  a  source  of  income. 

2.  Such  as  shall  be  purchased  by  or  conveyed  to  it  in  satis- 
faction, or  on  account  of,  debts  previously  contracted  in  the 
course  of  its  business. 

3.  Such  as  it  shall  purchase  at  sale  under  judgments,  de- 
crees, liens,  or  mortgage  foreclosures,  against  securities  held  by 
it:  Providing,  that  no  such  real  estate,  except  that  used  in 
the  transaction  of  its  business,  shall  be  carried  as  an  asset  on 
the  books  of  the  bank  for  a  longer  period  than  five  years  from 


§§  626-628    ExrsTiNQ  corporation  laws,  1913.  446 

the  date  of  its  purchase.     [Laws  1907,  §  21,  p.  526 ;  Laws  1913, 
c.  22.] 

§  626.    Receiving  Deposits  When  Insolvent — Penalty. 

[§  3331,  Rem.-Bal.]  The  owners  or  officers  of  any  bank 
who  shall  fraudulently  receive  any  deposit,  knowing  that  such 
bank  is  insolvent,  shall  be  deemed  guilty  of  a  felony,  and  pun- 
ished upon  conviction  thereof,  by  a  fine  not  exceeding  one 
thousand  dollars,  or  imprisoned  in  the  state  penitentiary  not 
exceeding  ten  years,  or  both  such  fine  and  imprisonment,  at 
the  discretion  of  the  court.     [Laws  1907,  §  22,  p.  526.] 

Held,  not  to  apply  to  private  bankers.     (State  v.  Youngbluth,  60  Wash. 
383,  111  Pac.  240.) 

§  627.    Reorganization  as  National  Bank — ^Liabilities. 

[§  3332,  Rem.-Bal.]  Any  state  bank  reorganized  under  the 
laws  of  the  United  States  as  a  national  bank,  as  soon  as  it  shall 
have  obtained  a  certificate  from  the  Controller  of  the  Cur- 
rency authorizing  it  to  commence  business,  under  the  United 
States  banking  laws,  shall  retain  and  hold  all  the  assets,  real 
and  personal,  which  it  acquired  during  its  existence  under  this 
act,  and  shall  hold  the  same  subject  to  all  existing  liabilities 
against  said  bank  at  the  time  of  its  reorganization.  [Laws 
1907,  §  23,  p.  526.] 

§  628.  Reorganization  from  National  to  State  Bank — Lia- 
bilities. 
[§  3333,  Rem.-Bal.]  Whenever  any  bank  existing  under 
the  laws  of  the  United  States  is  authorized  to  dissolve,  and 
shall  have  taken  the  necessary  steps  to  effect  dissolution,  it 
shall  be  lawful  for  a  majority  of  the  directors  of  such  bank, 
upon  the  authority,  in  writing,  of  the  owners  of  three-fo«rths 
of  its  capital  stock,  with  the  approval  of  the  State  Examiner, 
to  execute  articles  of  incorporation,  as  provided  in  this  act, 
which  articles,  in  addition  to  the  requirements  above,  shall  set 
forth  the  authority  derived  from  the  stockholders  of  such 
dissolved  national  bank,  and  upon  filing  the  same  as  herein- 
before provided  for  the  organization  of  banks,  the  same  shall 
become  a  bank  under  the  laws  of  this  state,  and  thereupon  all 


447  BANKS — FORMATION  AND  REGULATION.       §§  629-631 

assets  of  such  dissolved  national  bank  shall  by  act  of  law  be 
vested  and  become  the  property  of  such  state  bank  subject  to 
all  liabilities  of  such  national  bank  not  liquidated  under  the 
laws  of  the  United  States  before  such  reorganization.  [Laws 
1907,  §  24,  p.  527.] 

§  629.     Fraudulent  Conveyances  Void. 

[§  3334,  Rem.-Bal.]  Every  transfer  of  its  property  or  as- 
sets made  by  any  bank  in  this  state,  after  it  shall  have  become 
insolvent,  within  the  spirit  of  this  act,  with  a  view  to  the  pref- 
erence of  one  creditor  over  another,  or  to  prevent  the  equal 
distribution  of  its  property  and  assets  among  its  creditors, 
Bhall  be  void.     [Laws  1907,  §  25,  p.  527.] 

§  630.  Checks  not  to  be  Certified  Unless  Funds  are  on  De- 
posit. 
[§  3335,  Rem.-Bal.]  No  owner,  officer,  agent,  clerk  or  em- 
ployee of  any  bank  shall  certify  a  check  unless  the  amount 
thereof  actually  stands  to  the  credit  of  the  drawer  on  the 
books  of  the  bank,  and  any  person  who  shall  willfully  violate 
this  provision,  shall,  on  conviction  thereof,  be  deemed  guilty 
of  a  misdemeanor,  and  be  punished  by  a  fine  not  exceeding 
one  thousand  dollars.  Any  such  check  so  certified  by  a  duly 
authorized  person  shall  be  a  good  and  valid  obligation  of  the 
bank  in  the  hands  of  an  innocent  holder.  [Laws  1907,  §  26, 
p.  527.] 

§  631.    Savings  Banks. 

[§3336,  Rem.-Bal.]  Any  bank  which  shall  designate  its 
business  as  that  of  a  savings  bank  shall  have  power  to  carry 
on  the  business  of  banking  as  prescribed  and  limited  in  this 
act,  and  may  receive  money  on  savings  deposits,  and  such 
deposits  shall  be  repaid  to  the  depositor  or  his  lawful  repre- 
sentative, when  required,  at  such  time  or  times,  and  with  such 
interest,  as  the  regulations  of  the  bank  from  time  to  time  pre- 
scribe. A  pass-book  shall  be  issued  to  each  savings  depositor, 
containing  the  rules  and  regulations  prescribed  by  the  bank 
governing  such  deposits,  in  which  shall  be  entered  each  de- 
posit made  by  and  each  payment  to  such  depositor.     And  no 


§§  632-634    EXISTING  corporation  laws,  1913.  448 

payment  made  to  such  depositor,  and  no  payment  or  check 
against  any  such  savings  account,  shall  be  made,  unless  accom- 
panied by  and  entered  in  the  pass-book  issued  therefor,  except 
for  good  cause  and  assurance,  satisfactory  to  the  bank  officers ; 
but  nothing  in  this  section  shall  prevent  savings  banks  from 
issuing  time  certificates  of  deposit  or  certificates  of  deposit 
specifically  issued  subject  to  the  rules  and  regulations  govern- 
ing savings  deposits.     [Laws  1907,  §  27,  p.  527.] 

§  632,     Separate  Books  to  be  Kept.  , 

[§  3337,  Rem.-Bal.]  Any  bank  combining  the  business  of 
a  commercial  bank  and  a  savings  bank  shall  keep  with  the  re- 
spective depositors  separate  books  of  account  for  each  kind  of 
business.     [Laws  1907,  §  28,  p.  528.] 

§  633.     Deposits  by  Persons  Under  Disabilities — Payment. 

[§  3338,  Rem.-Bal.]  "Where  any  deposit  is  made  in  any 
bank  in  his  or  her  own  name  by  any  minor,  married  woman,  or 
other  person  under  disability  such  bank  may  pay  such  money 
on  a  check  or  order  of  such  person,  the  same  as  in  other  cases, 
and  such  payments  shall  be  in  all  respects  valid  in  law. 
[Laws  1907,  §  29,  p.  528.] 

§  634.    Use  of  Names  Prohibited. 

[§  3339,  Rem.-Bal.]  No  person  or  persons,  association  or 
body  corporate,  except  banks,  or  trust  companies,  incorpo- 
rated under  the  law^s  of  the  United  States,  or  the  laws  of  the 
state  of  Washington,  and  existing  foreign  banks  now  doing 
business  in  the  state  of  Washington,  shall  advertise  or  put 
forth  a  sign  having  thereon  any  of  the  following  words : 
"Bank,"  "Banking  Company,"  "Trust,"  or  any  artificial 
or  corporate  name,  or  words  indicating  that  such  person,  per- 
sons, association  or  body  corporate  is  a  bank,  trust  company, 
or  savings  bank,  or  shall  in  any  way  solicit  or  receive  de- 
posits as  an  incorporated  bank.  Every  person,  association, 
or  body  corporate,  violating  the  provisions  of  this  act,  shall 
be  fined  not  more  than  one  thousand  dollars  ($1,000.00)  per 
day  for  each  day  of  such  violation.  From  and  after  the  first 
day  of  January,  1915,  no  person,  persons,  copartnership,  as- 


440        BANKS — FORMATION  AND  REGULATION.   §  §  634a-G;]5 

sociation,  or  body  corporate  except  banks  or  trust  companies 
incorporated  under  the  laws  of  the  United  States  or  the  laws 
of  the  state  of  Washington  and  existing  foreign  banks  now 
doing  business  in  the  state  of  Washington,  or  mutual  or 
co-operative  savings  companies  or  associations  doing  a  bank- 
ing business  as  defined  in  section  3315  of  this  act,  shall  trans- 
act a  banking  business  in  this  state.  [Laws  1913,  c.  147,  §  3 ; 
Laws  1907,  §  30,  p.  528.] 

§  634a.     Unauthorized  Use  of  Corporate  Name. 

[§  3340,  Rem.-Bal]  Any  person  or  persons  who  shall  put 
up,  or  cause  to  be  put  up,  or  exhibit,  any  sign  or  advertise- 
ment, purporting  thereby  to  be  an  incorporated  bank,  or  shall 
do  business  under  a  corporate  name  when  they  are  not  such, 
shall,  on  conviction  thereof,  be  adjudged  guilty  of  a  misde- 
meanor, and  punished  by  a  fine  not  exceeding  two  hundred 
dollars.  [Laws  1913,  c.  147,  §  5 ;  Laws  1891,  p.  130,  §  38 ;  2 
H.  C,  §245;  Bal.,  §7174.] 

§  634b.     Private  Banks  to  Incorporate. 

[§33391/2,  Rem.-Bal.]  All  firms  or  individuals  who  on 
January  1st,  1913,  were  conducting  private  banks  and  receiv- 
ing deposits  as  such  and  who  desire  to  do  a  banking  business 
on  and  after  January  1st,  1915,  shall  prior  to  that  time  in- 
corporate under  the  laws  of  this  state  applicable  thereto,  and 
the  capital  stock  of  such  corporation  shall  be  in  such  sum  as 
is  required  by  existing  law,  all  of  which  shall  be  subscribed 
and  at  least  ten  thousand  dollars  thereof  paid  in  in  cash,  and 
the  balance  of  said  capital  stock  must  be  paid  in  at  such  time 
and  in  such  amounts  as  shall  be  required  by  the  state  bank 
examiner.     [Laws  1913,  e.  147,  §  4.] 

§  635.    Act  Does  not  Affect  Transactions  Already  Had. 

[§  3341,  Rem.-Bal.]  Nothing  in  this  act  shall  be  construed 
to  affect  the  legality  of  investments  heretofore  made,  or  of 
transactions  heretofore  had,  pursuant  to  any  provisions  in 
force  when  such  investments  were  made  or  transactions  had. 
[Laws  1907,  §  31,  p.  529.] 
29 


§§  636-639    EXISTING  corporation  laws,  1913,  450 

§  63G.     Leans  to  Officers — Liability  of  Directors. 

[§  3342,  Rem.-Bal.]  No  officer  or  employee  of  any  corpora- 
tion transacting  a  banking  business  in  this  state  shall  be  per- 
mitted to  loan  to  himself  any  of  the  funds  of  the  bank  upon  his 
own  note  or  obligation,  without  first  having  obtained  the  ap- 
proval of  a  majority  of  the  board  of  directors  of  the  bank,  and 
the  approval,  if  obtained,  shall  be  made  a  part  of  its  records. 
And  if  the  directors  of  any  bank  shall  knowingly  permit  any 
of  its  officers,  directors,  or  employees  of  such  bank  to  borrow 
its  funds  in  an  excessive  and  dishonest  manner,  every  director 
who  participated  in  and  assented  to  the  same,  shall  be  held 
liable  in  his  personal  and  individual  capacity  for  all  damages 
which  the  corporation,  its  shareholders,  or  any  other  person 
shall  have  sustained  in  consequence  of  such  violation.  [Laws 
1907,  §  32,  p,  530.] 

§  637,    Amount  of  Funds  to  be  Kept  on  Hand. 

[§  3343,  Rem.-Bal.]  Every  bank  doing  business  under  this 
act  shall  have  on  hand  at  all  times,  in  available  funds,  not  less 
than  twenty  per  cent  of  its  demand  liabilities ;  such  sums  may 
consist  of  balances  due  it  from  good,  solvent  banks  located  at 
commercial  centers,  and  at  such  other  points  as  the  State  Ex- 
aminer may  approve,  and  actual  cash,  or  checks  on  solvent 
banks  located  in  the  same  city,     [Laws  1907,  §  33,  p.  529.] 

§  638.     Compensation  and  Expenses  of  Examiner. 

[§3295,  Rem.-Bal.]  The  State  Examiner  shall  receive  a 
salary  of  thirty-six  hundred  dollars  a  year,  and  each  deputy 
state  examiner  shall  receive  a  salary  of  two  thousand  four  hun- 
dred dollars  a  year ;  and  the  State  Examiner  shall  be  allowed 
an  additional  sum  as  may  be  necessary,  for  clerical  assistance 
in  his  office,  office  rent,  traveling  and  other  expenses,  detailed 
vouchers  for  all  of  which  shall  be  filed  with  his  report.  [Laws 
1909,  §8  [9],  p.  696.] 

§  639.    Seal  of  Examiner — Instrument  shall  Bear  Same. 

[§  3296,  Rem.-Bal.]  The  State  Examiner,  with  the  ap- 
proval of  the  Governor,  shall  devise  a  seal  with  a  suitable  in- 
scription, for  his  office,  a  description  of  which,  with  a  certifi- 


451  BANKS — FORMATION   AND   REGULATION,       §§  640,  641 

cate  of  approval  by  the  Governor,  shall  be  filed  in  the  office 
of  the  Secretary  of  State,  with  an  impression  thereof,  which 
shall  thereupon  be  and  become  the  seal  of  office  of  the  State 
Examiner.  Every  certificate,  assignment  and  conveyance, 
executed  by  the  said  State  Examiner  in  pursuance  of  the  au- 
thority conferred  upon  him  by  law,  and  sealed  with  the  seal 
of  his  ofifice,  shall  be  received  as  evidence  and  recorded  in  the 
proper  recording  offices,  in  the  same  manner  and  with  like 
effect  as  a  deed  regularly  acknowledged  as  required  by  law, 
and  all  copies  of  papers  in  the  office  of  said  Examiner,  certi- 
fied by  him  and  authenticated  by  his  seal,  shall  be  received  in 
evidence  equally  and  in  like  manner  as  the  originals.  [Laws 
1907,  §  35,  p.  530.] 

§  640.     Banks  to  Make  Reports — Publication. 

[§  3297,  Rem.-Bal.]  Every  bank  shall  make  at  least  three 
reports  each  year  to  the  State  Examiner,  on  days  designated 
by  the  controller  of  the  currency  on  which  national  banks 
shall  make  reports,  according  to  forms  to  be  prescribed  by 
him,  verified  by  the  president,  manager  or  cashier,  and  by 
two  directors,  which  shall  exhibit  in  detail,  and  under  appro- 
priate heads,  the  resources  and  liabilities  of  the  bank,  and 
shall  be  transmitted  to  the  State  Examiner  within  ten  days 
of  the  receipt  of  a  request  therefor  from  him.  And  such  re- 
port in  condensed  form,  according  to  forms  to  be  prescribed 
by  the  State  Examiner,  shall  be  published  once  in  a  newspaper 
of  general  circulation  published  in  the  place  where  the  bank 
is  located,  or  if  there  be  no  newspaper  published  in  such  place, 
then  in  some  newspaper  published  in  the  same  county.  Proof 
of  publication  shall  be  transmitted  to  the  State  Examiner, 
within  twenty  days  from  the  day  fixed  for  such  report.  The 
State  Examiner  Shall  also  have  power  to  call  for  special  re- 
ports from  any  bank  whenever  in  his  judgment  the  same  is 
necessary,  in  order  to  obtain  a  full  knowledge  of  its  condition, 
[Laws  1909,  §  10,  p.  697.] 

§  641.     Penalty  for  Failure  to  Report. 

[§  3298,  Rem.-Bal.]  Every  bank  which  fails  to  make, 
transmit  and  publish  any  report  required  under  the  preceding 


§§  642,  643     EXISTING  corporation  laws,  1913.  452 

section  shall  be  subject  to  a  penalty  of  ten  dollars  ($10.00)  per 
day  for  each  day 's  delay  after  the  period  specified  in  said  sec- 
tion.    [Laws  1907,  §  37,  p.  530.] 

§  642.    Examiner  to  Make  Annual  Report  to  Governor. 

[§  3299,  Rera.-Bal.]  The  State  Examiner  shall  receive  and 
place  on  file  in  his  office  the  reports  required  to  be  made  by 
banks  under  this  act,  prepare  and  furnish  to  all  such  banks  the 
blank  forms  for  such  statements  or  reports  as  may  be  by  this 
act  required  of  them ;  make  on  or  before  the  first  day  of  Feb- 
ruary of  each  year,  a  report  for  the  preceding  year  to  the 
Governor  of  this  state,  showing: 

1.  A  summary  of  the  conditions  of  the  banks  subject  to  his 
control  at  the  date  of  their  last  report. 

2.  A  list  of  banks  which  have  been  organized  or  closed  dur- 
ing the  year. 

3.  The  amount  of  money  collected  and  expended  by  him. 
It  shall  be  his  duty  to  publish  annually  at  the  expense  of  the 

state,  in  pamphlet  form  at  least  five  hundred  copies  of  such 
report,  and  he  shall  furnish  a  copy  of  same  free  to  each  bank 
doing  business  under  the  provisions  of  this  act,  and  shall  fur- 
nish copies  to  any  applicant  upon  payment  of  actual  cost  of 
printing  thereof.     [Laws  1907,  §  38,  p.  531.] 

§  643.    Examination  of  Banks. 

[§  3300,  Rem.-Bal.j  It  shall  be  the  duty  of  the  State  Ex- 
aminer, or  his  deputy,  without  previous  notice  to  visit  each 
and  every  bank  doing  business  in  this  state,  except  national 
banks,  at  least  once  in  each  year  and  oftener  if  necessary,  for 
the  purpose  of  making  a  full  and  careful  investigation  and 
inquiry  into  the  condition  of  affairs  of  such  bank,  and  for 
that  purpose  the  Examiner  or  deputy  is  hereby  authorized  and 
empowered  to  administer  oaths  and  to  examine  under  oath  the 
owners  and  directors  and  all  officers  and  employees  and  agents 
of  such  bank;  and  any  willful  false  swearing  in  any  such 
examination  shall  be  deemed  perjury  and  punished  as  such. 
[Laws  1907,  §  39,  p.  531.] 


453  BANKS — FORMATION   AND   REGULATION.       §§  644-6-lG 

§  644.     Fee  for  Examination. 

[§  3301,  Rem.-Bal.]  The  State  Examiner  shall  collect  from 
each  bank  for  each  complete  examination  of  its  condition, 
twenty-five  dollars  ($25.00)  for  each  examination,  and  in  ad- 
dition thereto,  one  two-hundredths  per  cent  (1-200%)  on  all 
deposits,  including  those  of  banks,  and  certificates  of  deposit 
at  the  time  of  the  examination  of  the  bank,  but  in  no  case  shall 
the  charge  be  more  than  two  hundred  dollars.  All  money  col- 
lected under  the  provision  of  this  section  shall  be  paid  into  the 
general  fund  of  the  state :  Provided,  however,  that  no  bank 
shall  be  required  to  pay  for  more  than  one  examination  in 
any  one  year.     [Laws  1909,  §  11,  p.  697.] 

§  645.     Impairment  of  Capital. 

[§3302,  Rem.-Bal.]  Whenever  it  shall  appear  from  any 
report  of  any  bank,  or  whenever  the  Examiner  shall  have  rea- 
son to  believe  that  the  capital  of  such  bank  is  reduced  by  im- 
pairment or  otherwise  below  the  amount  required  by  this  act, 
or  by  its  certificate  or  articles  of  incorporation,  it  shall  be 
the  duty  of  the  Examiner  to  require  such  bank  to  make  good 
the  deficiency  so  appearing,  or  to  reduce  its  capital  in  accord- 
ance with  the  provisions  of  section  17  of  this  act  [3326,  Rem.- 
Bal.]  ;  and  to  give  effect  to  such  requisition  he  shall  have  the 
power  to  examine  or  cause  to  be  examined  any  such  bank,  to  as- 
certain the  amount  of  any  such  impairment  of  capital,  and 
whether  his  requirements  have  been  complied  with.  And  if 
such  bank  shall  neglect  for  three  months  to  comply  with  such 
requirements,  the  same  shall  be  cause  for  the  proceedings  pro- 
vided for  in  section  42  of  this  act  [3303,  Rem.-Bal.].  [Laws 
1907,  §  41,  p.  532.] 

§  646.     Violation  of  Act — Appointment  of  Receiver. 

[§  3303,  Rem.-Bal.]  If  the  State  Examiner,  upon  examina- 
tion of  the  affairs  of  any  bank  governed  by  this  act,  shall  find 
that  such  bank  has  been  guilty  of  violating  its  charter  or  the 
provisions  of  this  act,  or  is  conducting  its  business  in  an  unsafe 
manner,  he  shall,  by  an  order  addressed  to  the  bank  so  offend- 
ing, direct  discontinuance  of  such  illegal  or  unsafe  practices, 
and  if  such  bank  shall  refuse  or  neglect  to  comply  with  such 


§§  647,  648    EXISTING  corporation  laws,  1913.  454 

order  within  a  period  of  thirty  days,  he  may  immediately 
apply  to  the  superior  court  of  the  county  in  which  such  bank 
has  its  principal  place  of  business,  for  the  appointment  of  a 
receiver  of  such  bank,  who,  if  he  be  appointed,  shall  proceed 
to  administer  the  assets  of  the  bank  in  accordance  with  law. 
[Laws  1907,  §  42,  p.  532.] 

§  647.     Bank  Under  Control  of  Examiner. 

[§  3304,  Rem.-Bal.]  Any  bank  doing  business  under  this 
act  may  place  its  affairs  and  assets  under  the  control  of  the 
State  Examiner  by  posting  a  notice  on  its  front  door  as  follows : 

"This  bank  is  in  the  hands  of  the  State  Examiner." 

The  posting  of  such  notice,  or  the  taking  possession  of  any 
bank  by  the  State  Examiner,  shall  be  sufficient  to  place  all  its 
assets  and  property  of  whatever  nature  in  the  possession  of  the 
State  Examiner,  and  shall  operate  as  a  bar  to  any  attachment 
proceedings.     [Laws  1907,  §  43,  p.  532.] 

§  648.    Examiner  to  Take  Charge  of  Bank — Receivers. 

[§  3305,  Rem.-Bal.]  If  upon  examination  made  by  the  Ex- 
aminer or  his  deputy,  or  from  any  report  made  to  the  Exam- 
iner, it  shall  appear  that  any  bank  is  insolvent,  it  shall  be 
the  duty  of  the  Examiner  to  immediately  take  charge  of  such 
bank  and  all  the  property  and  effects  thereof.  Upon  taking 
charge  of  any  bank,  the  Examiner  shall  as  soon  as  possible, 
ascertain  by  a  thorough  examination  into  its  affairs,  its  actual 
condition,  and  whenever  he  shall  become  satisfied  that  such 
bank  cannot  resume  business,  or  liquidate  its  indebtedness  to 
the  satisfaction  of  all  its  creditors,  he  shall  report  the  fact 
of  its  insolvency  to  the  attorney  general,  who  shall  immedi- 
ately upon  receipt  of  such  notice,  institute  proper  proceedings 
in  the  proper  court  for  the  purpose  of  having  a  receiver  ap- 
pointed to  take  charge  of  such  bank,  and  to  wind  up  the 
affairs  and  business  thereof  for  the  benefit  of  its  depositors, 
creditors  and  stockholders.  The  State  Examiner  may  appoint 
a  special  deputy  State  Examiner  to  take  charge  of  the  affairs 
of  an  insolvent  bank  temporarily,  until  a  receiver  is  appointed ; 
such  deputy  shall  qualify,  give  bond  and  receive  compensa- 


455  BANKS — FORMATION   AND  REGULATION.       §§  649-651 

tion  the  same  as  a  regular  deputy;  such  compensation  to  be 
paid  by  such  bank  or  allowed  by  the  court  in  costs  in  the  case 
of  appointment  of  a  receiver :  Provided,  that  in  no  case  shall 
any  bank  continue  in  charge  of  such  special  deputy  for  a 
longer  period  than  ninety  days :  Provided  further,  that  after 
a  bank  has  been  taken  charge  of  by  the  State  Examiner  or  a 
deputy,  if  it  be  ascertained  upon  examination,  to  the  satis- 
faction of  the  Examiner,  that  the  said  bank  is  solvent,  he  may 
permit  the  same  to  be  reopened,  and  it  shall  in  that  event  re- 
possess the  officers  of  such  bank  with  all  of  its  funds  and 
assets,  after  deducting  therefrom  the  necessary  expense  in- 
cident to  the  charge  and  control  thereof  while  in  the  hands 
of  the  Examiner.     [Laws  1907,  §  44,  p.  533.] 

§  649.     Compensation  of  Receivers. 

[§  3306,  Kem.-Bal]  Receivers  provided  for  in  this  act 
shall  receive  such  compensation  as  shall  be  allowed  by  the 
court,  but  in  no  event  to  exceed  the  fees  allowed  executors  and 
administrators  in  the  administration  of  estates.  [Laws  1907, 
§  45,  p.  533.] 

§  650.    Examiner  to  Keep  Record  of  Fees  Collected. 

[§  3307,  Rem.-Bal.]  It  shall  be  the  duty  of  the  State  Ex- 
aminer to  keep  a  record  of  all  fees  collected  by  him  or  his 
deputy,  together  with  a  record  of  the  expense  incurred  in 
making  the  examinations  of  all  banks,  and  pay  to  the  State 
Treasurer  at  the  times  and  in  the  manner  prescribed  by  law, 
all  fees  collected,  together  with  all  funds  received  by  him  offi- 
cially from  whatsoever  source,  and  he  shall  file  with  the  State 
Treasurer,  quarterly,  an  itemized  statement  showing  from 
whom  collected.     [Laws  1907,  §  46,  p.  534.] 

§  651.     Examiner  not  to  Disclose  or  Make  Public  Informa- 
tion. 

[§  3308,  Rem.-Bal.]  The  State  Examiner  shall  keep  proper 
books  of  record  of  all  acts,  matters  and  things  done  by  him 
under  the  provisions  of  this  act,  as  records  of  his  office. 
Neither  he  nor  his  clerks  shall  disclose  any  fact  or  information 
obtained  in  the  course  of  the  business  of  the  department,  ex- 
cept so  far  as  this  act  makes  it  their  duty  to  make  public 


§§  652-654    EXISTING  corporation  laws,  1913.  456 

records  and  publish  the  same,  and  any  violation  of  this  pro- 
hibition shall  subject  the  offender  to  prosecution  for  mis- 
demeanor in  any  court  of  competent  jurisdiction,  and  to 
punishment  by  fine  not  exceeding  one  thousand  dollars,  with 
imprisonment  in  the  county  jail  until  the  same  is  paid;  and 
such  conviction  shall  subject  the  offender  to  a  forfeiture  of  his 
office  or  employment.     [Laws  1907,  §  47,  p.  534.] 

§  652.     Distribution  of  Assets  of  Insolvent  Banks. 

[§  3309,  Rem -Bal.]  In  distributing  the  assets  of  any  bank 
for  which  a  receiver  has  been  appointed  under  the  provisions 
of  this  act,  the  claims  of  depositors  shall  be  given  preference 
over  all  other  claims  except  claims  for  labor:  Provided,  that 
this  section  shall  not  be  so  construed  as  to  impair  the  rights  of 
secured  creditors.     [Laws  1907,  §  48,  p.  534.] 

§  653.     Attorney  General  to  Act. 

[§  3310,  Rem.-Bal.]  The  attorney  general  of  the  state  shall 
conduct  all  actions,  suits  or  proceedings  begun  by  the  State 
Examiner  under  the  authority  of  this  act.  [Laws  1907,  §  49, 
p.  534.] 

§  654.  Duties  Heretofore  Performed  by  State  Auditor  and 
Secretary  of  State  Hereafter  Performed  by  Ex- 
aminer. 
[§  3311,  Rem.-Bal.]  That  all  duties  now  required  to  be 
performed  by  and  all  responsibilities  now  imposed  upon  the 
auditor  of  this  state,  under  the  laws  regulating  the  business 
of  banking  shall  hereafter  be  performed  by  the  State  Exam- 
iner, and  all  reports  and  documents  now  on  file  in  the  state 
auditor's  office  pertaining  to  banks  now  in  existence  are 
hereby  transferred  to  the  custody  of  the  Bank  Examiner. 
That  all  duties  now  required  to  be  performed  by  and  all  re- 
sponsibilities now  imposed  upon  the  Secretary  of  State  under 
chapter  176  of  the  Laws  of  1903,  relating  to  the  inspection  and 
supervision  of  trust  companies,  shall  hereafter  be  performed 
by  the  State  Examiner,  and  all  reports  and  documents  now  in 
existence  are  hereby  transferred  to  the  custody  of  the  Bank 
Examiner.     [Laws  1907,  §  50,  p.  534.] 


457  BANKS — FORMATION   AND   REGULATION.       §§  655-658 

§  655.     Repeal  of  Former  Banking  Law. 

[§  3313,  Rem.-Bal.]  All  acts  and  parts  of  acts  reflating 
the  organization  and  management  of  banks  inconsistent  with 
this  act  are  hereby  repealed,  but  nothing  herein  shall  be  held 
to  repeal  any  law  regulating  trust  companies,  foreign  banks 
and  foreign  bankers  doing  business  in  this  state.  [Laws  1907, 
§  52,  p.  535.] 

§  656.     Penalty  for  False  Statement  or  Entry. 

[§  3314,  Rem.-Bal.]  Any  person  or  persons  who  shall  will- 
fully and  knowingly  subscribe  to  or  make  or  cause  to  be  made 
any  false  statement  or  false  entry  in  the  books  of  any  bank  or 
corporation  transacting  a  banking  business  or  shall  knowingly 
subscribe  to  or  exhibit  false  or  fictitious  papers  or  securities 
with  the  intent  to  deceive  any  person  or  persons  authorized  to 
examine  into  the  affairs  of  said  bank  or  corporation,  or  shall 
make,  state  or  publish  any  false  statement  of  the  amount  of 
the  assets  or  liabilities  of  any  such  bank  or  corporation,  shall 
be  deemed  guilty  of  a  felony  and  upoii  conviction  thereof  shall 
be  imprisoned  in  the  state  penitentiary  not  less  than  one  year 
nor  more  than  ten  years.     [Laws  1907,  §  53,  p.  535.] 

§  657.    Forfeiture  for  Violating  Act. 

[§  3367,  Rem.-Bal.]  Every  foreign  bank  or  foreign  banker, 
and  every  officer,  agent  or  employee  thereof,  violating  any  of 
the  provisions  of  this  act,  shall  for  each  violation  forfeit  and 
pay  to  the  state  of  Washington  the  sum  of  one  thousand  dol- 
lars. Said  forfeiture  may  be  recovered  in  an  action  by  the 
attorney  general  in  the  name  of  the  state  of  Washington  in 
the  superior  court  of  the  county  where  such  bank  or  branch 
bank  shall  be  located.     [Laws  1905,  §  3,  p.  55.] 

§  658.    Defining  "Foreign  Bank"  and  "Foreign  Banker." 

[§  3368,  Rem.-Bal.]  In  construing  this  act  the  terms 
"foreign  bcnk"  and  "foreign  banker"  shall  be  deemed  to  in- 
clude : 

1.  Every  corporation  not  organized  under  the  laws  of  the 
territory  or  state  of  Washington  doing  a  banking  business,  ex- 
cept a  national  bank. 


§§  669,  660      EXISTING   CORPORATION  LAWS,   1913.  458 

2.  Every  unincorporated  company,  partnership  or  associa- 
tion of  two  or  more  individuals  organized  under  or  pursuant 
to  the  laws  of  another  state  or  country  doing  a  banking  busi- 
ness authorized  by  this  act. 

3.  Every  other  unincorporated  company,  partnership  or 
association  of  two  or  more  individuals  doing  a  banking  busi- 
ness authorized  by  this  act,  if  the  members  thereof,  owning  a 
majority  interest  therein,  or  entitled  to  more  than  one-half  the 
profits  thereof,  or  who  would,  if  it  were  dissolved,  be  entitled 
to  more  than  one-half  the  net  assets  thereof,  are  not  residents 
of  this  state. 

4.  Every  nonresident  of  this  state  doing  a  banking  business 
authorized  by  this  act  in  his  own  name  and  right  only,  [Laws 
1905,  §  4,  p.  56.] 

§  659.  Foreign  Banks  and  Bankers — Not  to  Receive  De- 
posits— Exceptions. 
[§  3365,  Rem.-Bal.]  Any  foreign  bank  or  foreign  banker 
may  keep  an  office  for  the  purpose  of  loaning  money  and  buy- 
ing and  selling  exchange,  coin  or  bullion,  at  any  place  or 
places  within  this  state,  but  shall  not  in  any  manner,  directly 
or  indirectly,  receive  deposits:  Provided,  however,  that  noth- 
ing in  this  section  contained  shall  prevent  any  existing  branch 
of  any  foreign  bank  which  was  engaged  in  doing  a  banking 
business  at  any  place  or  places  within  this  state  on  the  first 
day  of  January,  1905,  or  its  successors  or  assigns  becoming 
such  prior  to  the  date  upon  which  this  act  takes  effect,  from  re- 
ceiving deposits  and  transacting  a  general  banking  business. 
[Laws  1905,  §  1,  p.  55.] 

§  660.     Capital  Stock  Required. 

[§  3366,  Rem.-Bal.]  Every  foreign  bank  or  foreign  banker 
heretofore  having  established,  or  hereafter  establishing  an 
office  in  this  state  shall  have,  and  at  all  times  maintain,  at 
every  such  office,  a  capital  not  less  in  amount  than  that  re- 
quired by  the  national  bank  act  for  the  organization  of  a  na- 
tional bank  at  the  time  when,  and  place  where,  such  office  was 
or  shall  be  opened,  and  the  payment  of  taxes  on  such  amount 
shall  be  prima  facie  evidence  of  the  payment  and  existence  of 


459  BANKS — FORMATION   AND  REGULATION.  §  660 

such  capital ;  and  no  such  foreign  bank  or  foreign  banker  shall 
set  forth  on  the  stationery  of  such  bank  or  banker  or  in  any 
manner  advertise  a  greater  capital,  surplus  and  undivided 
profits  than  are  actually  maintained  at  any  such  bank  within 
this  state.     [Laws  1905,  §  2,  p.  55.] 


§§  661,  662      EXISTING    CORPORATION    LAWS,    1913.  460 


DEPOSITORIES  OF  MONEY  TO  REPORT. 

§  661.  To  Make  Return  of  Deposits  Standing  Inactive  Ten 
Years — Notice  to  be  Published. 
[§  3344,  Rem.-Bal.]  The  cashier  or  secretary  of  every  sav- 
ings bank  and  loan  society,  and  every  institution  in  which 
deposits  of  money  are  made,  shall,  within  fifteen  days  after 
the  first  day  of  December,  in  the  year  one  thousand  nine  hun- 
dred and  five,  and  within  fifteen  days  of  the  first  day  of 
December  of  each  and  every  second  succeeding  year  thereafter 
return  to  the  Secretary  of  State  of  the  state  of  Washington  a 
sworn  statement  showing  the  amount  standing  to  his  credit, 
the  last  known  place  of  residence  or  postoffice  address,  and 
the  fact  of  death  if  known,  to  said  cashier  or  secretary  of 
every  depositor  who  shall  not  have  made  a  deposit  therein,  or 
withdrawn  therefrom  any  part  of  his  deposit,  or  any  part  of 
the  interest  thereon  for  the  period  of  more  than  ten  years  next 
preceding;  and  the  cashiers  and  secretaries  of  such  savings 
banks,  savings  and  loan  societies  and  institutions  for  deposit 
of  savings  shall  give  notice  of  these  deposits  in  one  or  more 
newspapers  published  in  or  nearest  to  the  city,  county  or  town 
where  such  banks  are  situated  at  least  once  a  week  for  four 
successive  weeks,  the  cost  of  such  publication  to  be  paid  pro 
rata  out  of  said  unclaimed  deposits :  Provided,  however,  that 
this  act  shall  not  apply  to  or  affect  the  deposit  made  by  or  in 
the  name  of  any  person  known  to  the  said  cashier  or  secretary 
to  be  living.  The  Secretary  of  State  shall  annually  turn  over 
all  reports  made  by  him  to  the  attorney  general  for  proceed- 
ings for  forfeiture,  if  he  shall  be  so  advised.  [Laws  1905,  §  1, 
p.  244,  c.  129.] 

§  662.     Refusal  to  Make  Report — Penalty. 

[§  3345,  Rem.-Bal.]  Any  cashier  or  secretary  of  any  of 
the  banking  institutions  mentioned  in  section  1  of  this  act 
[3344,  Rem.-Bal.]  neglecting  or  refusing  to  make  the  sworn 
statement  required  by  section  1  [3344,  Rem.-Bal.]   shall  be 


461  DEPOSITORIES  OF   MONEY  TO  REPORT.  §  662 

guilty  of  a  misdemeanor  and  on  conviction  thereof  shall  be 
fined  in  any  sum  not  less  than  fifty  dollars  nor  more  than  one 
thousand  dollars  or  confined  in  the  county  jail  not  less  than 
ten  days  nor  more  than  ninety  days,  or  both  such  fine  and  im- 
prisonment.    [Laws  1905,  §  2,  p.  245,  c.  129.] 


§§  663-666    EXISTING  corporation  laws,  1^13.  462 


CORPORATIONS  OTHER  THAN  THOSE 

FORMED  FOR  THE  PURPOSE  OF 

PROFIT. 

§  663.     Formation — Purposes. 

[§3752,  Rem.-Bal.]  Corporations  may  be  formed  under 
the  provisions  of  this  act  for  any  lawful  purpose  except  the 
carrying  on  of  a  business,  trade,  avocation  or  profession  for 
profit.     [Laws  1907,  §  1,  p.  255.] 

§  664.  Membership — No  Capital  Stock— Shares  not  to  be 
Issued. 
[§  3753,  Rem.-Bal.]  The  incorporators  and  members  of  a 
corporation  formed  under  the  provisions  of  this  act  may  be 
individuals,  copartnerships  or  corporations.  It  shall  have  no 
capital  stock,  and  shares  therein  shall  not  be  issued.  The 
interest  of  each  incorporator  or  member  shall  be  equal  to  that 
of  any  other,  and  no  incorporator  or  member  can  acquire  any 
interest  which  will  entitle  him  to  any  greater  voice,  vote,  au- 
thority or  interest  in  the  corporation  than  any  other  member. 
[Laws  1907,  §  2,  p.  256.] 

§  665.    Membership  Certificates — Assignable. 

[§  3754,  Rem.-Bal.]  The  corporation  may  issue  member- 
ship certificates,  which  certificates  shall  be  assignable  under 
such  provisions,  rules  and  regulations  as  may  be  prescribed  by 
the  by-laws  of  the  company.     [Laws  1907,  §  3,  p.  256.] 

§  666.     Termination  of  Membership. 

[§  3755,  Rem.-Bal.]  A  membership  in  a  corporation 
formed  hereunder  may  be  terminated  by  voluntary  with- 
drawal, by  expulsion  and  by  death.  Losses  of  membership 
through  any  such  causes  and  the  incidents  thereof  shall  be 
governed  by  the  by-laws  of  the  company.  [Laws  1907,  §  4, 
p.  256.] 


463  MEMBERSHIP    CORPORATIONS.  §§  667,  668 

§  667.     Organization — Articles  to  be  Filed. 

[§  3756,  Rem.-Bal.]  Not  less  than  five  individuals,  copart- 
nerships, or  corporations  shall  be  required  to  form  a  corpora- 
tion hereunder.  Articles  of  incorporation  shall  be  prepared, 
executed  and  acknowledged  in  triplicate ;  one  copy  shall  be 
filed  in  the  office  of  the  Secretary  of  State,  another  in  the  office 
of  the  county  auditor  of  the  county  in  which  the  principal 
place  of  business  of  the  corporation  is  located,  and  the  third 
retained  in  the  possession  of  the  corporation.  Such  articles 
shall  state  the  name  of  the  corporation,  the  purposes  for  which 
it  is  formed,  the  place  where  its  principal  place  of  business 
will  be,  the  term  for  which  it  is  to  exist,  not  exceeding  fifty 
years,  the  number  of  the  trustees  thereof,  and  the  names  of 
the  trustees  who  shall  manage  the  affairs  of  the  corporation 
for  such  length  of  time,  not  less  than  two  months,  nor  more 
than  six  months,  as  may  be  designated  in  such  articles,  until 
the  trustees  shall  be  elected  by  the  members.  The  formation 
of  the  corporation  shall  be  complete  upon  the  filing  of  the 
articles  as  herein  provided.     [Laws  1907,  §  5,  p.  256.] 

§  668.    Must  Adopt  By-laws  Before  Transacting  Any  Busi- 
ness. 

[§  3757,  Rem.-Bal.]  Before  transacting  any  business  or  ac- 
quiring any  property  the  members  of  the  corporation  must 
meet  and  adopt  by-laws.  The  vote  of  a  majority  of  all  the 
members  of  the  corporation  shall  be  necessary  to  the  adoption 
of  such  by-laws  and  when  adopted  the  same  must  be  written 
in  a  book  to  be  kept  by  the  corporation.  The  corporation  may 
by  its  by-laws  provide  for  the  time,  place  and  manner  of  call- 
ing and  conducting  its  meetings,  the  number  of  trustees,  the 
time  of  their  election,  their  term  of  office,  the  mode  and 
manner  of  their  removal,  the  mode  and  manner  of  filling 
vacancies  on  the  board  caused  by  death,  resignation,  removal 
or  otherwise,  the  power  and  authority  of  the  trustees,  the  com- 
pensation of  the  trustees  or  of  any  officer,  the  mode  and 
manner  of  conducting  business,  the  mode  and  manner  of  con- 
ducting elections,  the  qualifications  for  membership,  on  what 
conditions   there  may  be   a  succession   of  membership,   the 


§  669  EXISTING  CORPORATION  LAWS,  1913.  464 

manner  in  which  membership  shall  cease,  the  mode  and 
manner  of  expulsion  of  a  member,  the  termination  of  a  mem- 
ber's interest  in  the  corporate  property  upon  the  cessation  of 
his  membership,  and  whether  he  shall  be  remunerated  therefor, 
and  if  so  in  what  manner,  the  amount  of  membership  fee,  and 
the  dues,  installments  or  labor  which  each  member  may  be  re- 
quired to  pay  or  perform,  if  any,  the  charges  which  may  be 
made  for  services  rendered  or  supplies  furnished  the  members 
of  the  corporation  by  it,  the  manner  of  collection  or  enforce- 
ment of  membership  fees,  dues  or  charges,  and  the  method  of 
forfeiting  the  membership  interest  for  nonpayment  or  non- 
performance, the  method,  time  and  manner  of  permitting  the 
withdrawal  of  a  member,  if  at  all,  and  how  his  interest  may  be 
ascertained  and  payments  made  therefor,  if  the  company  de- 
cide that  he  should  be  reimbursed  therefor,  the  formation  of 
a  surplus  fund  and  the  manner  and  proportions  in  which  such 
surplus  fund  shall  be  distributed,  either  upon  the  order  of 
the  corporation  or  upon  its  dissolution,  and  generally,  all  such 
other  matters  as  may  be  proper  to  carry  out  the  purpose  for 
which  the  corporation  was  formed.     [Laws  1907,  §  6,  p.  257.] 

§  669.    Powers  of  Corporations. 

[§  3758,  Rem.-Bal.]  Corporations  formed  under  this  act 
shall  have  power  of  succession  by  their  corporate  name  for 
fifty  years,  in  such  name  may  sue  and  be  sued  in  any  court, 
may  make  and  use  a  common  seal  and  alter  the  same  at 
pleasure,  may  receive  gifts  and  devises,  may  purchase,  hold 
and  convey  real  and  personal  property,  as  the  purposes  of  the 
corporation  may  require,  may  appoint  such  subordinate  agents 
or  officers  as  the  business  may  require,  may  demand  assess- 
ments of  members  and  sell  or  forfeit  their  interests  in  the 
corporation  for  default  with  respect  to  any  lawful  provision 
of  the  by-laws,  may  enter  into  any  lawful  contracts  and  incur 
obligations  essential  to  the  transaction  of  its  affairs  for  the 
purpose  for  which  it  was  formed,  may  borrow  money  and 
issue  notes,  bills  or  evidence  of  indebtedness,  and  may  mort- 
gage its  property  to  secure  the  same  as  its  by-laws  may  pro- 
vide, and,  generally,  may  do  all  things  necessary  or  proper  to 


465  MEMBERSHIP    CORPORATIONS.  §§  670-672 

carry  out  the  purpose  of  its  creation.     [Laws  1907,  §  7,  p. 
258.] 

§  670.     Change  of  Purpose. 

[§  3759,  Rem.-Bal.]  The  purpose  or  purposes  for  which  a 
corporation  is  created  hereunder  may  be  altered,  modified,  en- 
larged, or  diminished  by  the  vote  of  two-thirds  of  all  the  mem- 
bers at  a  special  meeting  called  for  such  purpose,  notice  of 
which  meeting  shall  be  given  in  the  manner  provided  by  the 
by-laws  for  the  giving  of  notice  for  the  election  of  trustees. 
[Laws  1907,  §  8,  p.  258.] 

§  671.    Amendment  of  By-laws. 

[§  3760,  Rem.-Bal.]  The  by-laws  of  the  corporation  shall 
prescribe  the  manner  in  which  they  may  be  amended.  [Laws 
1907,  §  9,  p.  258.] 

§  672.    Dissolution — Cannot  Have  Receiver,  When. 

[§  3761,  Rem.-Bal.]  Any  corporation  formed  under  this 
act  may  be  dissolved  and  its  affairs  wound  up  voluntarily  by 
the  written  request  of  two-thirds  of  the  members.  Such  re- 
quest must  be  addressed  to  the  trustees  and  specify  reasons 
why  the  winding  up  of  the  affairs  of  the  corporation  is  deemed 
advisable,  and  name  three  persons,  members  of  the  corpora- 
tion, to  act  in  liquidation.  Upon  the  filing  of  such  request 
with  the  trustees,  and  a  copy  thereof  in  the  office  of  the  Secre- 
tary of  State,  and  of  the  county  auditor  of  the  county  where 
the  principal  place  of  business  of  the  corporation  is  located, 
the  power  of  the  trustees  shall  cease  and  the  persons  appointed 
shall  proceed  to  wind  up  the  corporation,  realize  upon  its  as- 
sets, pay  its  debts  and  divide  the  residue  of  the  money  among 
the  members  in  the  proportion  to  which  each  member  is  en- 
titled under  the  by-laws.  This  shall  be  done  within  the  time 
designated  in  such  request  or  such  further  time  as  may  be 
granted  by  writing  signed  by  two-thirds  of  the  members  and 
filed  in  the  office  of  the  Secretary  of  State  and  of  the  county 
auditor  of  the  county  where  the  principal  place  of  business 
of  the  corporation  is  located.  No  receiver  of  such  a  corpora- 
30 


§§  673,  674    EXISTING  corporation  laws,  1913.  466 

tion  or  of  its  property,  or  of  any  right  therein,  can  he  ap- 
pointed by  any  court  upon  the  application  of  any  member 
save  after  judgment  of  dissolution  in  an  action  brought  by 
the  state  to  forfeit  its  franchise.     [Laws  1907,  §  10,  p.  258.] 

§  673.     Shall  not  Engage  in  Business  for  Gain,  etc. 

[§  3762,  Rem.-Bal.]  Any  corporation  formed  under  the 
provisions  of  this  act  that  shall  engage  in  any  business,  trade, 
avocation  or  profession  for  gain  or  which  shall  enter  into  any 
agreement  or  combination  in  restraint  of  trade,  or  to  fix  or 
establish  the  price  of  any  commodity,  or  to  limit  or  regulate 
the  production  or  distribution  of  any  commodity,  or  which 
shall  attempt  to  restrain  trade,  or  fix  or  establish  the  price  of 
any  commodity,  or  limit  or  regulate  the  production  or  dis- 
tribution of  any  commodity  shall  forfeit  its  right  to  exist  as 
a  corporation  and  judgment  of  dissolution  may  be  entered  in 
an  action  brought  by  the  state  to  have  such  forfeiture  declared. 
Nothing  herein  contained  shall  be  construed  to  forbid  such  a 
corporation  accumulating  a  surplus  fund  through  membership 
fees  and  dues,  or  from  charges  made  its  members  for  services 
rendered  or  supplies  furnished  them  by  it,  and  the  distribu- 
tion of  such  fund  among  the  members  in  the  manner  provided 
by  the  by-laws.     [Laws  1907,  §  11,  p.  259.] 

§  674.    Existing  Corporations  may  Reorganize  Under  Act. 

[§3763,  Rem.-Bal.]  Any  corporation  heretofore  formed 
under  any  law  of  this  state,  the  purpose  or  purposes  for  the 
creation  of  which  is  such  that  it  might  have  been  formed  and 
carry  on  business  hereunder,  may  avail  itself  of  the  privileges 
and  incur  the  liabilities  prescribed  by  this  act  upon  a  majority 
vote  of  all  the  members  to  the  effect  that  it  desires  to  re- 
organize hereunder,  the  result  of  such  vote  to  be  evidenced  by 
a  certificate  executed  by  the  president  and  secretary  under  the 
seal  of  the  corporation  and  filed  in  the  office  of  the  Secretary 
of  State  and  of  the  county  auditor  of  the  county  where  the 
principal  place  of  business  of  the  corporation  is  located. 
Upon  the  filing  of  such  certificate  it  shall  be  endowed  with  all 
the  privileges  and  affected  by  all  the  liabilities  prescribed  here- 


467  MEMBERSHIP  CORPORATIONS.  §  675 

under,  but  the  time  of  its  existence  fixed  by  its  articles  shall 
not  be  enlarged  by  such  action.     [Laws  1907,  §  12,  p.  259.] 

§  675.    Filing  ajid  License  Fee. 

[§  3764,  Rem.-Bal.]  All  corporations  formed  under  the 
provisions  of  this  act  shall  pay  to  the  Secretary  of  State,  for 
the  use  of  the  state,  the  same  fee  for  filing  its  articles  of  in- 
corporation and  the  same  annual  license  fee,  as  is  prescribed 
by  law  for  other  corporations  having  a  capital  stock.  [Laws 
1907,  §  13,  p.  260.] 


§§677,678    EXISTING  corporation  laws,  1913.  468 


RELIGIOUS,  EDUCATIONAL,  SOCIAL  AND 
CHARITABLE  CORPORATIONS. 

§  677.    Formation  of— Articles. 

[§  3731,  Rem.-Bal.]  Any  two  or  more  persons  desirous  of 
forming  a  corporation  for  a  college,  seminary,  church,  library, 
or  benevolent,  temperance,  charitable  or  scientific  society,  shall 
make  and  subscribe  written  articles  of  incorporation  in  tripli- 
cate and  acknowledge  the  same  before  any  ofi6.cer  authorized 
to  take  the  acknowledgment  of  deeds,  and  file  one  of  such 
articles  in  the  office  of  the  Secretary  of  State,  and  another  in 
the  office  of  the  county  auditor  of  the  county  in  which  the 
principal  place  [of]  business  of  the  corporation  is  intended 
to  be  located,  and  retain  the  third  in  the  possession  of  the  cor- 
poration.    Such  articles  shall  specify : 

1.  The  corporate  name  and  location  and  chief  place  of  busi- 
ness of  such  corporation. 

2.  If  a  joint  stock  company,  the  amount  of  capital  stock, 
and  the  amount  constituting  a  share ;  if  not  a  joint  stock  com- 
pany, then  the  terms  of  admission  to  membership. 

3.  The  object  for  which  the  corporation  is  formed. 

4.  By  what  officers  the  affairs  of  said  corporation  shall  be 
managed,  and  when  such  officers  are  to  be  elected,  or,  if  ap- 
pointed, when  and  by  whom  such  appointments  are  to  be 
made.  [Laws  1895,  §  1,  p.  347;  Cd.  1881,  §  2450;  1  H.  C,  § 
1638;  Bal.,  §4438.] 

"Person"  construed  to  be  individual  as  distinct  from  corporation. 
(Denny  Hotel  Co.  v.  Schram,  6  Wash.  134.) 

§  678.     Powers  of  Such  Corporations  Enumerated. 

[§3732,  Rem.-Bal.]  When  such  articles  shall  have  been 
.  filed,  as  aforesaid,  the  persons  who  shall  have  signed  and  veri- 
fied the  same,  and  their  successors,  shall  be  a  body  politic  and 
corporate,  with  perpetual  succession;  they  shall  be  capable  in 
law  of  suing  and  being  sued,  pleading  and  being  impleaded, 
answering  and  being  answered  in  all  the  courts  of  the  state; 


469  RELIGIOUS,    ETC.,    CORPORATIONS.  §§  679,  680 

they  may  have  a  common  seal,  alter  and  change  the  same  at 
pleasure;  acquire,  mortgage  and  sell  property,  personal  and 
real,  for  the  purpose  of  carrying  out  the  objects  of  the  cor- 
poration, and  make  by-laws,  rules  and  regulations,  as  they 
may  deem  proper  and  best  for  the  welfare  and  the  good  order 
of  the  corporation ;  and  may  amend  the  articles  of  incorpora- 
tion by  supplemental  articles,  executed  and  filed  the  same  as 
the  original  articles:  Provided,  that  such  by-laws,  rules  and 
regulations  be  not  contrary  to  the  constitution  and  laws  of  the 
United  States,  and  the  existing  laws  of  the  state.  [Laws  1886, 
§  1,  p.  86;  Cd.  1881,  §  2451;  1  H.  C,  §  1639;  Bal.,  §  4439.] 

§  679.  Secret  Societies — Articles — Where  to  be  Filed  and 
What  to  Contain. 
[§  3733,  Rem.-Bal.]  Any  lodge,  encampment  of  [or]  other 
subordinate  lodge  of  Free  and  Accepted  Masons,  Independent 
Order  of  Odd  Fellows,  Knights  of  Pythias,  or  other  fraternal 
society,  desiring  to  incorporate,  shall  make  articles  of  incor- 
poration in  triplicate,  and  file  one  of  such  articles  in  the  office 
of  the  Secretary  of  State  and  another  in  the  office  of  the 
county  auditor  of  the  county  in  which  the  meetings  of  such 
lodge,  chapter  or  encampment  are  held ;  such  articles  shall  be 
signed  by  the  presiding  officer  and  the  secretary  of  such  lodge, 
chapter  or  encampment,  and  attested  by  the  seal  thereof,  and 
shall  specify : 

1.  The  name  of  such  lodge  or  other  society,  and  the  place 
of  holding  its  meetings. 

2.  The  name  of  the  grand  body  from  which  it  derives  its 
rights  and  powers  as  such  lodge  or  society. 

3.  The  names  of  the  presiding  officer  and  the  secretary  hav- 
ing the  custody  of  the  seal  of  such  lodge  or  society. 

4.  What  officers  shall  join  in  the  execution  of  any  contract 
by  such  lodge  or  society  to  give  it  force  and  effect  in  accord- 
ance with  the  usages  of  such  lodges  or  society.  [Laws  1903, 
§  1,  p.  118;  Cd.  1881,  §  2452;  1  H.  C,  §  1640;  Bal.,  §  4440.] 

§  680.    Filing  Fee— With  Secretary  of  State. 

[§  3734,  Rem.-Bal.]  The  Secretary  of  State  shall  file  such 
articles  of  incorporation  in  his  office  and  issue  a  certificate  of 


§§  681-684      EXISTING    CORPORATION    LAWS,    1913.  470 

incorporation  to  any  such  lodge  or  other  society  upon  the  pay- 
ment of  the  sum  of  five  dollars.     [Laws  1903,  §  2,  p.  118.] 

§  681.     Powers — Not  Subject  to  License  Fee. 

[§  3735,  Rem.-Bal.]  Such  lodge  or  other  society  shall  be 
a  body  politic  and  corporate  with  all  the  powers  and  incidents 
of  a  corporation  upon  its  compliance  with  sections  one  and 
two  of  this  act  [3733,  3734,  Rem.-Bal.]  :  Provided,  however, 
that  such  fraternal  corporation  shall  not  be  subject  to  any 
license  fee  or  other  corporate  tax  of  commercial  corporations. 
[Laws  1903,  §  3,  p.  118.] 

§  682.     Waiver  of  Original  Rights  to  Corporate  Name. 

[§  3736,  Rem.-Bal.]  Any  lodge  or  society,  or  the  members 
thereof,  having  heretofore  attempted  to  incorporate  as  a  body 
under  the  provisions  of  an  act  entitled  "An  act  to  provide  for 
the  incorporation  of  associations  for  social,  charitable  and  edu- 
cational purposes,"  approved  March  21st,  1895,  such  lodge  or 
society  may  incorporate  under  its  original  corporate  name  by 
complying  with  the  provisions  of  sections  one  and  two  of  this 
act  [3733,  3734,  Rem.-Bal.]  :  Provided,  that  such  lodge  or 
society  shall  attach  to  and  file  with  the  articles  of  incorpora- 
tion provided  for  in  this  act  a  certificate  duly  signed,  executed 
and  attested  by  the  officers  of  the  said  corporation  consenting 
to  such  reincorporation  and  waiving  all  rights  of  the  original 
corporation  to  such  corporate  name.     [Laws  1903,  §  4,  p.  119.] 

§  683.     Colleges  may  Confer  Degrees. 

[§  3737,  Rem.-Bal.]  Any  college  or  seminary  hereafter  in- 
corporated by  the  provisions  of  this  chapter  shall  have  power, 
and  is  hereby  invested  with  authority,  to  confer  the  degrees 
usually  conferred  by  such  institution.  [Laws  1873,  §  4,  p. 
411 ;  Cd.  1881,  §  2453 ;  1  H.  C,  §  1641 ;  Bal.,  §  4441.] 

§  684.    Dissolution  of  Corporation. 

[§  3738,  Rem.-Bal.]  Any  corporation  desiring  its  dissolu- 
tion may,  by  a  three-fourths  vote  of  all  its  members  at  some 
regular  meeting,  execute  a  surrender  of  all  its  corporate 
powers,  and  upon  the  filing  of  duplicate  surrenders  with  the 


471  RELIGIOUS,  ETC.,   CORPORATIONS.  §  685 

said  auditor  and  Secretary  of  State,  the  said  corporation  shall 
be  dissolved  to  all  intents  and  purposes.  [Laws  1879,  §  5,  p. 
411;  Cd.  1881,  §  2454;  1  H.  C.  §  1642;  Bal.,  §  4442.] 

§  685.    Validating  Defective  Articles. 

[§  3739,  Rem.-Bal.]  That  all  instruments  purporting  to 
be  articles  of  incorporation  for  a  college,  seminary,  church, 
library,  or  benevolent,  charitable,  or  scientific  society,  made 
and  executed  in  accordance  with  the  provisions  of  chapter  9, 
title  18,  of  volume  1  of  Hill's  Annotated  Statutes  and  Codes 
of  Washington,  or  under  and  by  virtue  of  the  provisions  of 
section  2450  to  2454,  both  inclusive,  of  the  Code  of  Washing- 
ton of  1881,  except  that  the  same  have  been  acknowledged 
before  an  officer  authorized  by  law  to  take  the  acknowledg- 
ment of  deeds,  and  have  not  been  sworn  to  by  the  trustees 
as  by  said  laws  required,  or  have  been  filed  with  the  auditor 
of  the  county  where  the  chief  place  of  business  of  the  cor- 
poration so  purporting  to  be  formed  is  located,  instead  of 
being  recorded  as  by  said  laws  required,  or  which  are  de- 
fective in  both  of  said  respects,  are  hereby  declared  to  be,  and 
are  hereby  made  to  be,  good  and  valid  articles  of  incorpora- 
tion ;  and  the  corporations  formed,  or  attempted  to  be  formed 
by  virtue  of  said  articles  of  incorporation,  are  hereby  declared 
to  be,  and  are  hereby  made,  good  and  valid,  and  existing  cor- 
porations, with  the  same  and  as  full  powers,  rights  and  liabili- 
ties as  they  would  have  had  if  the  articles  of  incorporation 
had  been  executed  and  recorded  as  by  law  required,  and  that 
all  acts,  deeds,  and  proceedings  had  or  done  by  said  corpora- 
tions, or  under  said  articles  of  incorporation,  and  all  rights 
acquired  as  to  both  real  and  personal  property,  and  all  obliga- 
tions of  every  kind  incurred  by  such  corporations,  are  hereby 
made  of  the  same  force,  effect  and  validity  as  if  said  articles 
of  incorporation  had  been  executed  as  required  by  law. 
[Laws  1895,  §  1,  p.  24;  Bal.,  §  4443.] 

The  above-named  provisions  of  Hill's  Code  and  the  Code  of  1881  are 
preceding  sections. 


§§  686-688    EXISTING  corporation  laws,  1913.  472 


SOCIAL  AND  CHARITAB1.E  ORGANIZA- 
TIONS. 

§  686.    Agreement  of  Association. 

[§  3740,  Rem.-Bal.]  Two  or  more  persons  within  this  state 
who  associate  themselves  together  by  an  agreement  in  writing, 
as  hereinafter  described,  with  the  intention  of  forming  a  cor- 
poration for  any  of  the  purposes  hereinafter  specified,  upon 
complying  with  the  provisions  of  sections  4,  5,  and  6  of  this 
act  [3743-3745,  Rem.-Bal.],  shall  be  and  remain  a  corporation. 
[Laws  1895,  §  1,  p.  400;  Bal.,  §  4445.] 

"Person"    construed    to    be    individual    as    distinct    from   corporation, 
(Denny  Hotel  Co.  v.  Schram,  6  Wash.  134,  32  Pac.  1002.) 

§  687.    Associations,  Objects  of. 

[§  3741,  Rem.-Bal.]  Such  association  may  be  formed  for 
any  educational,  charitable,  benevolent  or  religious  purposes; 
for  the  prosecution  of  any  antiquarian,  historical,  literary, 
scientific,  medical,  artistic,  monumental  or  musical  purpose ; 
for  supporting  any  missionary  enterprise  having  for  its  object 
the  dissemination  of  religious  or  educational  instruction ;  for 
promoting  temperance  or  morality  in  this  state ;  or  other  chari- 
table or  social  bodies  of  a  like  character  and  purpose ;  for  the 
establishment  and  maintenance  of  social  clubs,  and  of  places 
for  reading-rooms,  libraries  or  social  meetings.  [Laws  1895, 
§2,  p.  400;  Bal,  §4446.] 

§  688.    Agreement  to  State,  What. 

[§3742,  Rem.-Bal.]  The  agreement  shall  state  that  the 
subscribers  thereto  associate  themselves  with  the  intention  of 
forming  a  corporation,  the  name  of  the  corporation,  the  pur- 
poses for  which  it  is  formed,  the  town  or  city — which  shall  be 
in  this  state — in  which  it  is  located,  and  if  it  has  a  capital 
stock,  the  amount  thereof,  and  the  number  and  par  value  of 
its  shares.  The  name  shall  be  one  not  previously  in  use  by 
any  existing  corporation,  and  shall  be  changed  only  as  here- 
inafter provided.     [Laws  1895,  §  3,  p.  400;  Bal.,  §  4447. J 


473  SOCIAL    AND    CHARITABLE    ORGANIZATIONS.       §§  689-691 

§  689.     Subscribers,  First  Meeting  of. 

[§3743,  Rem.-Bal.]  The  first  meeting  of  the  subscribers 
to  such  agreement  shall  be  called  by  a  notice  signed  by  one  or 
more  thereof,  stating  the  time,  place  and  purpose  of  the  meet- 
ing ;  a  copy  of  which  notice  shall,  seven  days  at  least  before  the 
day  appointed  for  the  meeting,  be  given  to  each  subscriber,  or 
left  at  his  usual  place  of  business  or  place  of  residence,  or  de- 
posited in  the  postofifice,  postpaid,  and  addressed  to  him  at  his 
usual  place  of  business  or  of  residence.  And  whoever  gives 
such  notices  shall  make  affidavit  of  his  doings,  which  shall  be 
recorded  in  the  records  of  the  corporation.  [Laws  1895,  §  4, 
p.  400;Bal.,  §4448.] 

§  690.     Temporary  Secretary — Election  of  Officers. 

[§3744,  Rem.-Bal.]  At  such  first  meeting,  including  any 
necessary  or  reasonable  adjournment,  an  organization  shall  be 
effected  by  the  choice  by  ballot  of  a  temporary  secretary,  and 
by  the  adoption  of  by-laws,  and  the  election  of  a  president,  sec- 
retary, treasurer  and  a  board  of  trustees,  not  less  than  three 
nor  more  than  twenty-five  in  number,  and  such  other  officers  as 
may  be  provided  for  by  the  by-laws.  At  such  first  meeting  no 
person  shall  be  eligible  as  an  officer  or  trustee  who  has  not 
subscribed  to  the  agreement  of  the  association,  but  any  cor- 
poration now  or  hereafter  organized  under  this  act,  may,  by 
a  by-law,  increase  or  diminish  the  number  of  trustees,  within 
the  limits  hereinbefore  provided.  The  temporary  secretary 
shall  make  and  attest  a  record  of  the  proceedings  until  the 
secretary  has  been  chosen.  [Laws  1905,  §  5,  p.  240;  Bal., 
§4449.] 

§  691.    Certificate — Contents  and  Filing  of. 

[§  3745,  Rem.-Bal.]  The  president,  secretary  and  a  ma- 
jority of  the  trustees  shall  forthwith  make,  sign  and  swear  to 
a  certificate  setting  forth  a  true  copy  of  the  agreement  of  as- 
sociation, with  the  names  of  the  subscribers  thereto,  the  date 
of  the  first  meeting  and  the  successive  adjournments  thereof, 
if  any,  and  shall  file  such  certificate  in  the  office  of  the  county 
auditor  of  the  county  wherein  the  organization  is  effected  and 


§  691  EXISTING  CORPORATION  LAWS,  1913.  474 

in  the  office  of  the  Secretary  of  State,  who,  upon  payment  of 
a  fee  of  five  dollars,  shall  cause  the  same  to  be  recorded  in  a 
book  to  be  kept  for  that  purpose,  and  shall  thereupon  issue  a 
certificate  in  the  following  form: 

State  of  Washington. 

Be  it  Imown  that,  whereas  (here  the  names  of  the  subscribers 
to  the  agreement  of  association  shall  be  inserted)  have  asso- 
ciated themselves  with  the  intention  of  forming  a  corporation 
under  the  name  of  (here  the  name  of  the  corporation  shall  be 
inserted),  for  the  purpose  (here  the  purpose  declared  in  the 
agreement  of  association  shall  be  inserted),  with  a  capital  of 
(here  the  amount  of  the  capital  stock  shall  be  inserted,  or  if 
there  is  no  capital  stock  this  clause  shall  be  omitted) ,  and  have 
complied  with  the  provisions  of  the  laws  of  this  state  in  such 
case  made  and  provided,  as  appears  from  the  certificate  of  the 
president,  secretary  and  a  majority  of  the  trustees  of  said  cor- 
poration, recorded  in  this  office;  now,  therefore,  I  (here  the 
name  of  the  secretary  shall  be  inserted)  Secretary  of  the  State 
of  Washington,  do  hereby  certify  that  said  (here  the  names  of 
the  subscribers  to  agreement  of  association  shall  be  inserted), 
their  associates  and  successors,  are  legally  organized  and  estab- 
lished as  and  are  hereby  made  an  existing  corporation,  under 
the  name  of  (here  the  name  of  the  corporation  shall  be  in- 
serted), with  the  powers,  rights  and  privileges  and  subject  to 
the  limitations,  duties  and  restrictions  which  by  law  appertain 
thereto. 

Witness  my  official  signature  subscribed  and  the  seal  of  the 

state    of    Washington    hereunto    affixed,    this    day    of 

in  the  year  ....    (In  these  blanks  the  day,  month 

and  year  of  execution  of  the  certificate  shall  be  inserted.) 

The  secretary  shall  sign  the  same  and  cause  the  seal  of  the 
state  to  be  thereto  affixed,  and  such  certificate  shall  be  conclu- 
sive evidence  of  the  existence  of  such  corporation.  He  shall 
also  cause  a  record  of  such  certificate  to  be  made,  and  such  cor- 
poration shall  forthwith  cause  a  certified  copy  of  such  record 
to  be  filed  in  the  office  of  the  auditor  of  the  county  wherein 
such  corporation  is  located.  [Laws  1895,  §6,  p.  401;  Bal., 
§  4450.] 


475  SOCIAL    AND    CHARITABLE    ORGANIZATIONS.       §§  692,  693 

§  692.     By-laws  to  Contain  What. 

[§  3746,  Rem.-Bal.]  The  corporation  may  prescribe  by  its 
laws  the  manner  in  which,  and  the  officers  and  agents  by  whom 
the  purposes  of  its  incorporation  may  be  carried  out.  The 
corporation  may  hold  real  and  personal  estate,  and  may  hire, 
purchase  or  erect  suitable  buildings  for  its  accommodation,  to 
be  devoted  to  the  purposes  set  forth  in  its  agreement  of  as- 
sociation, and  may  receive  and  hold  in  trust,  or  otherwise, 
funds  received  by  gift  or  bequest,  to  be  devoted  by  it  to  such 
purposes.  And  for  the  purposes  of  the  corporation  shall  have 
power  to  issue  its  promissory  notes,  bonds  or  other  obligations, 
to  be  secured  by  mortgages  on  its  real  estate  and  other  prop- 
erty in  such  manner  as  may  be  provided  by  its  by-laws.  The 
board  of  trustees  shall  have  power  to  sell  or  dispose  of  the 
whole  or  any  part  of  the  property,  either  real  or  personal, 
which  the  corporation  may  from  time  to  time  own,  and  to 
acquire  other  property,  but  shall  not  sell  or  dispose  of  or  pur- 
chase real  estate  unless  authorized  so  to  do  by  the  vote  of  two- 
thirds  of  all  the  stock  represented  or  two-thirds  of  the  mem- 
bers present  at  a  meeting  called  for  that  purpose,  written 
notice  of  which  shall  have  been  given  to  all  stockholders  or 
members  at  least  thirty  days  previous  thereto  by  mail,  in  such 
manner  as  shall  be  provided  by  the  by-laws,  which  two-thirds 
vote  must  comprise  at  least  a  majority  of  all  the  stock  or  of 
the  members  of  the  corporation.  Such  notice  shall  set  forth 
in  full  the  matter  or  proposition  to  be  considered  at  such 
meeting.  Voting  by  proxy  shall  be  allowed  at  such  meeting. 
[Laws  1907,  §  1,  p.  127;  Bal.,  §  M51.] 

§  693.     Beneficiaries. 

[§  3747,  Rem.-Bal.]  The  corporation  organized  for  any 
purpose  mentioned  in  section  two  [3741,  Rem.-Bal.]  may,  for 
the  purpose  of  assisting  widows,  orphans  or  other  persons  de- 
pendent upon  deceased  members,  provide  in  its  by-laws  for  the 
payment  by  each  member  of  a  fixed  sum,  to  be  held  by  such 
association  until  the  death  of  a  member  occurs,  and  then  to  be 
forthwith  paid  to  the  person  or  persons  entitled  thereto;  and 
such  fund  so  held  shall  not  be  liable  to  attachment  by  garnish- 


§§  694r-696      EXISTING  CORPORATION  LAWS,   1913.  476 

ment  or  other  process.  And  the  associations  may  be  formed 
under  this  act  for  the  purpose  of  rendering  assistance  to  such 
persons,  and  in  the  manner  herein  specified.  [Laws  1895,  §  8, 
p.  402;Bal.,  §4452.] 

§  694.    Death  Fund. 

[§  3748,  Rem.-Bal.]  Any  such  beneficiary  corporation  or 
society  may  hold  at  any  one  time  as  a  death  fund,  belonging 
to  the  beneficiaries  of  anticipated  deceased  members,  an 
amount  not  exceeding  one  assessment  from  a  general  or  un- 
limited membership,  or  an  amount  not  exceeding  in  the  aggre- 
gate one  assessment  from  each  limited  class  or  division  of  its 
members :  Provided,  that  nothing  in  this  section  shall  be  held 
to  restrict  such  fund  to  less  than  ten  thousand  dollars.  Such 
funds,  while  held  in  trust,  shall  be  deposited  in  safe  banking 
institutions,  subject  to  sight  drafts  for  distribution  to  the 
beneficiaries  aforesaid.     [Laws  1895,  §  9,  p.  403  ;  Bal.,  §  4453.] 

§  695.    Exempt  from  Operations  of  Insurance  Laws. 

[§  3749,  Rem.-Bal.]  The  provisions  of  the  general  laws  re- 
lating to  life  insurance  companies  shall  not  apply  to  such  bene- 
ficiary corporations,  associations  and  societies.  [Laws  1895, 
§10,  p.  403;  Bal.,  §4454.] 

§  696.     Not  Retroactive — Pre-existing  Societies  may  Adopt. 

[§  3750,  Rem.-Bal.]  Nothing  contained  in  this  act  shall 
affect  the  existence  of  any  association  or  corporation  hereto- 
fore formed  under  the  provisions  of  any  law  in  this  state  for 
any  of  the  purposes  mentioned  in  section  two  of  this  act  [3741, 
Rem.-Bal.],  [and]  any  such  corporation  may,  at  a  meeting 
called  for  the  purpose,  vote  to  adopt  the  provisions  of  this  act, 
and  upon  so  voting  and  complying  with  the  provisions  of  this 
section  shall  have  the  powers  and  privileges  and  be  subject  to 
the  duties  and  obligations  of  corporations  formed  under  this 
act.  After  so  voting  the  corporation  may  file  with  the  Secre- 
tary of  the  State  a  certificate  signed  and  sworn  to  by  its  presi- 
dent, secretary,  and  a  majority  of  its  board  of  trustees,  setting 
forth  a  copy  of  its  articles  of  incorporation  and  of  said  vote,  and 
the  date  of  the  meeting  at  which  the  vote  was  adopted,  and  the 


477  SOCIAL  AND  CHARITABLE  ORGANIZATIONS.  §  697 

Secretary  of  State,  upon  payment  of  a  fee  of  five  dollars,  shall 
cause  the  same  to  be  recorded,  and  shall  issue  a  certificate  in 
the  following  form : 

State  of  Washington. 

Be  it  known  that,  whereas,  (here  the  names  of  the  original 
incorporators  shall  be  inserted)  have  formally  associated  them- 
selves with  the  intention  of  forming  a  corporation  under  the 
name  of  (here  the  name  of  the  incorporation  shall  be  inserted) 
for  the  purpose  (here  the  purpose  declared  in  the  original 
articles  of  incorporation  shall  be  inserted),  under  the  provi- 
sions of  (here  the  designation  of  the  statute  under  the  provi- 
sions of  which  organization  was  effected,  shall  be  inserted), 
with  a  capital  of  (here  the  amount  of  capital  stock  as  it  stands 
fixed  at  the  date  of  the  certificate,  shall  be  inserted ;  or  if  there 
is  no  capital  stock  this  clause  shall  be  omitted) ,  and  the  provi- 
sions of  the  laws  in  this  state  in  such  case  made  and  provided 
have  been  complied  with,  as  appears  from  a  certificate  of  the 
proper  officers  of  said  corporation,  recorded  [in]  this  office; 
now,  therefore,  I  (here  the  name  of  the  secretary  is  to  be  in- 
serted). Secretary  of  the  State  of  Washington,  do  hereby  cer- 
tify that  said  (here  the  name  of  the  corporation  shall  be 
inserted)  is  legally  organized  and  established  as  an  existing 
corporation,  with  the  powers,  right  and  privileges,  and  sub- 
ject to  the  limitations,  duties  and  restrictions  which  by  law 
appertain  thereto. 

Witness  my  official  signature  hereunto  subscribed  and  the 

seal  of  [the]  state  of  Washington  hereunto  affixed,  this 

day  of ,  in  the  year (In  these  blanks  the  day, 

month  and  year  of  execution  of  the  certificate,  shall  be  in- 
serted.) 

This  certificate  shall  be  signed,  sealed  and  recorded,  and 
filed  in  the  same  manner,  and  shall  have  the  same  effect  as  the 
certificate  provided  in  section  six  [3745,  Rem.-Bal.].  [Laws 
1895,  §  11,  p.  403 ;  Bal.,  §  4455.] 

§  697.    Agreement,  Amendment  to. 

[  §  3751,  Rem.-Bal.]  Whenever  it  is  desired  to  amend  in  any 
particular  within  the  scope  of  this  act,  the  provisions  of  the 


§  697  EXISTING  CORPORATION  LAWS,  1913.  478 

articles  of  agreement  of  any  corporation  organized  or  qualified 
under  this  act,  such  amendment  or  amendments  shall  be  ef- 
fected by  the  filing  with  the  Secretary  of  State  of  a  certificate 
signed  and  sworn  to  by  the  president,  secretary  and  a  majority 
of  the  board  of  trustees,  which  certificate  shall  be  authorized 
by  a  vote  of  at  least  two-thirds  of  the  stock  represented  or 
members  of  the  corporation  present  at  a  meeting  called  and 
held  for  that  purpose,  in  the  manner  prescribed  by  the  by- 
laws and  the  Secretary  of  State  shall,  upon  payment  of  a  fee 
of  five  dollars,  cause  such  certificate  to  be  recorded,  and  shall 
issue  a  certificate  in  the  following  form : 

State  of  Washington. 

Be  it  known  that,  whereas,  (here  the  name  of  the  corpora- 
tion shall  be  inserted)  a  corporation  heretofore  duly  organized, 
has,  in  accordance  with  the  provisions  of  the  laws  of  this  state 
in  such  case  made  and  provided,  amended  its  articles  of  agree- 
ment as  follows:  (Here  shall  be  inserted  the  nature  of  the 
amendment  or  amendments),  as  appears  from  a  certificate  of 
the  proper  officers  of  said  corporation  recorded  in  this  office. 
Now  therefore,  I  (here  the  name  of  the  secretary  is  to  be  in- 
serted). Secretary  of  the  State  of  Washington,  do  hereby 
certify  that  such  amendment  (or  amendments)  ha.  .  been 
duly  adopted  as,  and  now  are,  a  part  of  the  articles  of  agree- 
ment of  said  corporation. 

Witness  my  official  signature  hereunto  subscribed  and  the 
seal  of  the  state  of  Washington  hereunto  affixed,  this   .... 

day  of in  the  year  ....      (In  these  blanks  the  day, 

month  and  year  of  execution  of  this  certificate  shall  be  in- 
serted.) 

This  certificate  shall  be  signed,  sealed  and  recorded,  and 
filed  in  the  same  manner  and  shall  have  the  same  effect  as  the 
certificate  provided  for  in  section  six  [3745,  Rem.-Bal.]. 
[Laws  1907,  §  1,  p.  128 ;  Bal.,  §  4456.] 


47D  BENEVOLENT   SOCIETIES.  §  698 


BENEVOLENT  SOCIETIES  FOR  PROTEC- 
TION OF  HOMELESS  OR  ABUSED 
CHILDREN. 

§  698.    Who  may  Take  Children— Surrender  by  Parents. 

[§  1700,  Rem.-Bal.]  Any  benevolent  or  charitable  society 
incorporated  under  the  laws  of  this  state  for  the  purpose  of  re- 
ceiving, earing  for  or  placing  out  for  adoption,  or  improving 
the  condition  of  orphan,  homeless,  neglected  or  abused  minor 
children  of  this  state  shall  have  authority  to  receive,  control, 
and  dispose  of  children  under  eighteen  (18)  years  of  age 
under  the  following  provisions : 

(a)  When  the  father  and  mother  or  the  person  or  persons 
legally  entitled  to  act  as  guardian  of  the  person  of  any  minor 
child  shall,  in  writing,  surrender  such  child  to  the  charge  and 
custody  of  said  society,  such  child  shall  thereafter  be  in  the 
legal  custody  of  such  society  for  the  purposes  herein  pro- 
vided. 

(b)  In  case  of  death  or  legal  incapacity  of  a  father  or  his 
abandonment  or  neglect  to  provide  for  his  family,  the  mother 
shall  have  authority  to  make  such  surrender,  and  in  case  of 
the  death  or  legal  incapacity  of  a  mother,  or  her  abandonment 
of  such  child,  then  the  father  shall  have  authority  to  make 
such  surrender. 

(c)  In  all  cases  where  the  person  or  persons  legally  author- 
ized to  mal?:e  such  surrender  are  not  known,  any  judge  of 
superior  court  may  cause  a  notice  of  hearing  to  be  published 
in  any  newspaper  of  general  circulation  printed  and  published 
in  the  county,  and  if  he  deems  it  best  for  such  orphan,  home- 
less, neglected  or  abused  child,  he  may  surrender  it  to  any 
benevolent  or  charitable  society  incorporated  under  the  laws 
of  Washington  and  having  for  its  object  the  care  of  such 
children. 

(d)  When  any  child  shall  have  been  surrendered  in  ac- 
cordance with  any  of  the  preceding  clauses  and  such  child 
shall  have  been  accepted  by  such  society,  then,  (but  not  other- 


§  699  EXISTING  CORPORATION  LAWS,  1913.  480 

•wise),  the  rights  of  its  natural  parents  or  of  the  guardian  of 
its  person  (if  any)  shall  cease  and  such  corporation  shall  be- 
come entitled  to  the  custody  of  such  child,  and  shall  have  au- 
thority to  care  for  and  educate  such  child  or  place  it  either 
temporarily  or  permanently  in  a  suitable  private  home  in  such 
manner  as  shall  best  secure  its  welfare.  Such  corporation 
shall  have  authority  when  any  such  child  has  been  surrendered 
to  it  in  accordance  with  any  of  the  preceding  provisions,  and 
it  is  still  in  its  control,  to  consent  to  its  adoption  under  the 
laws  of  Washington.  The  custody  or  control  of  any  such 
child  by  any  such  corporation  or  by  any  other  corporation,  in- 
stitution, society  or  person  may  be  inquired  into,  and,  in  the 
discretion  of  the  court,  terminated  at  any  time  by  the  superior 
court  of  the  county  where  the  child  may  be,  upon  the  com- 
plaint of  any  person,  and  a  showing  that  such  custody  is  not 
in  the  interest  of  the  child.     [Laws  1903,  §  1,  p.  58.] 

§  699.     When  Children  Taken  by  Process. 

[§  1701,  Rem.-Bal.]  Upon  complaint  of  any  person  in 
writing  other  than  an  officer  or  agent  of  such  society  or  cor- 
poration to  any  judge  of  the  superior  court,  giving  the  names 
and  residences  of  the  parents,  guardian,  (if  any)  or  next  of 
kin  of  such  child,  so  far  as  known,  and  alleging  that  the  father 
of  such  minor  child  is  dead,  or  has  abandoned  his  family  or  is 
an  habitual  drunkard  or  is  a  man  of  notoriously  bad  char- 
acter, or  is  imprisoned  for  crime,  or  has  grossly  abused  or 
neglected  such  child,  and  that  the  mother  of  such  child  is  an 
habitual  drunkard,  or  imprisoned  for  crime,  or  an  inmate  of 
a  house  of  ill-fame,  or  a  woman  of  notoriously  bad  character 
or  is  dead,  or  has  abandoned  her  family,  or  has  grossly  abused 
or  neglected  such  child,  and  alleging  that  the  welfare  of  such 
child  requires  that  legal  steps  be  taken  to  provide  for  its  care 
and  custody,  a  warrant  shall  issue  directing  the  proper  officer 
to  take  such  child  into  custody  and  care  for  or  dispose  of  it 
as  such  judge  shall  direct,  until  a  hearing  can  be  had, 
such  proceedings  shall  have  precedence  of  other  causes,  of 
which  hearing  not  less  than  five  days'  notice  shall  be  given 
to  such  parents,  guardian  or  next  of  kin  and  such  judge  shall 
hear  the  allegations  of  the  complaint  and  all  testimony  offered 


481  BENEVOLENT   SOCIETIES.  §§700,701 

for  or  against  the  same  and  determine  whether  in  his  judg- 
ment there  is  cause  for  a  change  in  the  care  and  custody  of 
such  child.  If  the  judge  shall  decide  to  change  the  care  and 
custody  of  such  child,  he  may  commit  the  child  to  the  care 
and  custody  of  any  such  benevolent  society  contemplated  in 
this  act  which  is  willing  to  receive  it,  and  such  commitment 
shall  carry  with  it  the  same  powers  and  authority  as  above 
provided  in  case  of  voluntary  surrender,  or  he  may  enter  such 
findings  and  transmit  the  papers  and  a  transcript  of  his  pro- 
ceedings to  the  county  commissioners  of  the  county  in  which  the 
case  arises  and  surrender  such  child  to  the  care  and  custody  of 
such  commissioners  and  it  may  be  disposed  of  without  further 
notice  to  the  parents,  guardian  or  next  of  kin.  [Laws  1903, 
§  2,  p.  60.] 

§  700.     Child  a  County  Charge,  Disposal  of— Notice. 

[§  1702,  Rem.-Bal.]  When  any  minor  is  a  county  charge, 
the  board  of  county  commissioners,  if  they  think  the  welfare 
of  the  child  demands  it,  may  surrender  such  child  to  the  care 
and  custody  of  any  benevolent  society  or  corporation  without 
the  consent  of  its  parents  unless  within  twenty  days  after  the 
notice  of  the  intention  of  such  commissioners  so  to  do,  given 
in  writing  to  parents,  guardian  or  next  of  kin  of  such  child 
so  far  as  known,  to  said  commissioners,  such  parents,  guardian 
or  next  of  kin  shall  provide  for  such  child  and  relieve  the 
county  thereof  and  when  any  child  has  been  so  surrendered 
by  the  county  commissioners,  it  may  be  disposed  of  as  herein 
provided  for  the  disposition  of  other  children.  (Laws  1903, 
sec.  3,  p.  60.) 

§  701.    Duties  of  Police  Officer. 

[§  1703,  Rem.-Bal.]  When  any  officer  or  agent  of  any  such 
society  shall  request  a  police  officer,  or  other  peace  officer,  to 
investigate  or  assist  in  the  investigation  of  any  alleged  case 
of  any  such  neglected  or  abused  child,  such  officer  shall  imme- 
diately make  or  assist  in  such  investigation  and  if  he  deem  it 
proper  shall  forthwith  take  such  child  into  custody  without 
warrant,  taking  such  child  and  reporting  such  case  at  once 
to  the  judge  of  the  superior  court  for  such  proceedings  as  may 
31 


§§  702-704      EXISTING    CORPORATION    LAWS,    1913.  482 

be  proper  under  the  provisions  of  this  act.     [Laws  1903,  §  4, 
p.  61.] 

§  702.    In  Case  of  Minor  Convicted  of  Charge,  Punishable 
by  Confinement  in  Reform  School. 

[§  1704,  Rem.-Bal.]  When  any  minor  under  eighteen  years 
of  age  shall  be  convicted  on  any  charge,  the  punishment  for 
which  may  be  imprisonment  or  confinement  in  the  reform 
school,  the  judge  of  the  superior  court,  if  he  finds  that  the  good 
of  such  minor  demands  it,  and  such  minor  is  an  orphan,  or  a 
homeless,  neglected  or  abused  minor  within  the  terms  of  this 
act,  or  is  a  county  charge,  or  the  parents  or  guardian  of  such 
minor  consent  thereto,  may  suspend  sentence  and  surrender 
the  custody  of  such  minor  to  any  society,  as  is  contemplated 
in  this  act,  when  such  society  is  willing  to  receive  such  minor, 
until  such  minor  shall  attain  the  age  of  majority,  or  for  a 
term  of  years  to  be  fixed  in  the  order  of  surrender,  and  such 
society  may  find  a  home  for  such  minor  and  surrender  his  cus- 
tody to  the  person  providing  such  home  for  the  term  fixed  in 
said  order  of  surrender,  which  surrender  by  the  society  shall 
be  approved  by  an  order  of  said  court :  Provided,  that  nothing 
in  this  section  shall  be  held  to  affect  the  natural  rights  of 
said  minor  or  of  his  parents  or  guardian,  except  in  the  matter 
of  his  custody :  And  provided  further,  that  if  said  minor  shall 
fail  to  conform  to  the  order  of  court  fixing  his  custody,  he 
may  be  apprehended  and  brought  before  the  court,  and  the 
court  may  sentence  said  minor  as  provided  by  law,  or  resur- 
render  him  as  the  court  may  deem  best  for  the  interests  of 
said  minor.     [Laws  1903,  §  5,  p.  61.] 

§  703.     Guardianship  of  Persons  Only. 

[§  1705,  Rem.-Bal.]  Nothing  in  this  act  shall  entitle  any 
such  society  to  act  as  guardian  or  to  have  control  of  the  estate 
of  any  minor  child.     [Laws  1903,  §  6,  p.  62.] 

§  704.    Habeas  Corpus — Effect  of  Proceedings. 

[§  1706,  Rem.-Bal.]  Upon  the  hearing  of  any  writ  of 
habeas  corpus  for  the  custody  of  any  such  child,  if  it  appears 
that  such  child  has  been  surrendered  to  any  such  corporation 


483  BENEVOLENT   SOCIETIES.  §  705 

under  the  provisions  of  this  act  such  surrender  shall  be  taken 
as  prima  facie  evidence  that  such  child  was  legally  and  prop- 
erly surrendered  to  such  corporation  and  that  such  corpora- 
tion is  entitled  to  the  custody  and  control  of  such  child  under 
the  provisions  of  this  act.     [Laws  1903,  §  7,  p.  62.] 

§  705.     Expenses  During  Examination — Costs. 

[§  1707,  Rem.-Bal]  The  l^oard  of  county  commissioners 
shall  pay  the  expenses  of  bringing  the  child  before  the  court 
and  caring  for  it  pending  a  hearing  under  this  act;  when  a 
child  is  surrendered  to  a  benevolent  society  under  the  provi- 
sions of  this  act  by  the  superior  court,  the  county  shall  pay 
such  society  a  reasonable  compensation  for  the  temporary  care 
of  such  child  until  it  is  placed  in  a  family  but  not  to  exceed 
fifty  ($50)  [dollars]  in  each  case.  No  clerk,  sheriff,  police 
officer,  member  of  the  board  of  county  commissioners  or  agent 
of  any  such  society  shall  charge  or  be  allowed  any  costs  what- 
ever in  these  proceedings,  except  where  a  complaint  shall  be 
adjudged  to  be  without  sufficient  cause  and  malicious,  in  which 
event  all  costs  shall  be  taxed  against  the  complainant:  Pro- 
vided, that  the  provisions  of  this  section  shall  not  apply  to 
cases  under  section  five  of  this  act  [1703,  Rem.-Bal.].  [Laws 
1903,  §  8,  p.  62.] 


§§  706-708      EXISTING   CORPORATION   LAWS,   1913.  484 


CEMETERY  ASSOCIATIONS. 

§  706.     Associations  may  be  Incorporated. 

[§  3643,  Rem.-Bal.]  Ten  or  more  persons  residing  within 
any  county  of  this  state  may  associate  themselves  together  be 
[by]  an  agreement  in  writing  in  the  manner  and  form  pre- 
scribed in  an  act  entitled  "An  act  to  provide  for  the  incor- 
poration of  associations  for  social,  charitable  and  educational 
purposes,"  approved  March  21,  1895,  being  contained  in  sec- 
tions 4445  to  4456,  inclusive,  of  Ballinger's  Annotated  Codes 
and  Statutes  of  Washington,  for  the  purpose  of  organizing 
themselves  into  a  cemetery  association,  and  upon  complying 
with  the  provisions  of  said  act,  so  far  as  applicable,  they  shall 
be  and  remain  a  corporation.     [Laws  1899,  §  1,  p.  44.] 

"Person"    construed    to    be    individual    as    distinct    from    corporation. 
(Denny  Hotel  Co.  v.  Schram,  6  Wash.  134.) 

§  707.     Corporate  Powers. 

[§  3644,  Rem.-Bal.]  All  such  associations  shall  have  power 
to  prescribe  the  terms  on  which  members  may  be  admitted,  the 
number  of  its  trustees  and  officers  and  the  time  and  manner 
of  their  election  or  appointment  and  the  time  and  place  of 
meeting  for  the  trustees  and  for  the  association,  and  to  pass 
all  such  other  by-laws  as  may  be  necessary  for  the  good  gov- 
ernment of  such  association.     [Laws  1899,  §  2,  p.  45.] 

§  708.     May  Hold  Lands — Fund  to  be  Created  and  Its  Use — 
Debts. 

[§  3645,  Rem.-Bal.]  Such  association  shall  be  authorized 
to  purchase  or  take  by  gift  or  devise,  and  hold  land  exempt 
from  execution  and  from  any  appropriation  to  public  pur- 
poses, for  the  sole  purpose  of  a  cemetery  not  exceeding  eighty 
acres,  which  shall  be  exempt  from  taxation  if  intended  to  be 
used  exclusively  for  burial  purposes,  and  in  no  wise  with  a 
view  to  profit  of  the  members  of  such  association :  Provided, 
that  when  the  land  already  held  by  the  association  is  all  prac- 
tically used  then  the  amount  thereof  may  be  increased  by 


485  CEMETERY   ASSOCIATIONS.  §  709 

adding  thereto  not  exceeding  twenty  acres  at  a  time.  Such 
association  may  by  its  by-laws  provide  that  a  stated  percentage 
of  the  monej^s  realized  from  the  sale  of  lots,  donations  or  other 
sources  of  revenue,  shall  constitute  an  irreducible  fund,  which 
fund  may  be  invested  in  such  manner  or  loaned  upon  such 
securities  as  the  association  or  the  trustees  thereof  may  deem 
proper.  The  interest  or  income  arising  from  the  irreducible 
fund,  provided  for  in  any  by-laws,  or  so  much  thereof  as  may 
be  necessary,  shall  be  devoted  exclusively  to  the  preservation 
and  embellishment  of  the  lots  sold  to  the  members  of  such  as- 
sociation, and  where  any  by-laws  have  been  enacted  for  the 
creation  of  an  irreducible  fund  as  herein  provided  for  it  can- 
not thereafter  be  amended,  in  any  manner  whatever  except 
for  the  purpose  of  increasing  such  fund.  After  paying  for 
the  land,  all  the  future  receipts  and  income  of  such  associa- 
tion subject  to  the  provisions  herein  for  the  creation  of  an 
irreducible  fund,  whether  from  the  sale  of  lots,  from  dona- 
tions, rents  or  otherwise,  shall  be  applied  exclusively  to  laying 
out,  preserving,  protecting  and  embellishing  the  cemetery  and 
the  avenues  leading  thereto,  and  in  the  erection  of  such  build- 
ings as  may  be  necessary  or  convenient  for  the  cemetery  pur- 
poses, and  to  paying  the  necessary  expenses  of  the  association. 
No  debts  shall  be  contracted  in  anticipation  of  any  future 
receipts  except  for  originally  purchasing,  laying  out  and 
embellishing  the  ground  and  avenues,  for  which  debts  so  con- 
tracted such  association  may  issue  bonds  or  notes,  and  secure 
the  same  by  way  of  mortgage  upon  any  of  its  lands,  except- 
ing such  lots  as  shall  have  been  conveyed  to  the  members 
thereof;  and  such  association  shall  have  power  to  adopt  such 
rules  and  regulations  as  they  shall  deem  expedient  for  dis- 
posing of  and  for  conveying  burial  lots.  [Laws  1899,  §  3,  p. 
45.] 

§  709.     May  Sell  Land. 

[§  3646,  Rem.-Bal.]  It  shall  be  lawful  for  said  trustees, 
wherever  in  their  opinion  any  portion  or  portions  of  their 
lands  are  unsuitable  for  burial  purposes,  to  sell  such  portion 
or  portions,  and  apply  the  avails  thereof  to  the  general  pur- 
poses of  such  association.     [Laws  1899,  §  4,  p.  46.] 


§§  710-712      EXISTING    CORPORATION    LAWS,    1913.  486 

§  710.     Exemptions. 

[§3647,  Rem.-Bal.]  Burial  lots,  sold  by  such  association 
shall  be  for  the  sole  purpose  of  interment,  and  shall  be  exempt 
from  taxation,  execution,  attachment  or  other  claims,  lien  or 
process  whatsoever,  if  used  as  intended,  exclusively  for  burial 
purposes  and  in  no  wise  with  a  view  to  profit.  [Laws  1899, 
§  5,  p.  46.] 

§  711.     Plat  to  be  Recorded — Reflation  of  Grounds. 

[§3649,  Rem.-Bal.]  All  such  associations  shall  cause  a 
plan  of  their  grounds  and  of  the  blocks  and  lots  by  them  laid 
out,  to  be  made  and  recorded,  such  blocks  and  lots  to  be  num- 
bered by  regular  consecutive  numbers,  and  shall  have  power  to 
inclose,  improve  and  adorn  the  grounds  and  avenues,  to  erect 
buildings  for  the  use  of  the  association  and  to  prescribe  rules 
for  the  designation  and  adorning  of  lots  and  for  erecting 
monuments  in  the  cemetery,  and  to  prohibit  any  use,  division, 
improvement  or  adornment  of  a  lot  which  they  may  deem 
improper.  An  annual  exhibit  shall  be  made  of  the  affairs  of 
the  association.  The  plan,  or  plat,  hereinbefore  required, 
shall  be  recorded  by  the  proper  county  auditor  for  a  fee  not 
to  exceed  ten  cents  a  lot,  and  if  the  actual  cost  of  recording 
the  same  shall  be  less  than  ten  cents  a  lot,  then  said  auditor 
shall  record  the  same  at  the  actual  cost  thereof.  [Laws  1905, 
§  6,  p.  123,  c.  64.] 

§  712.     Injury  to  Sepulture  or  Property— Penalty. 

[§3651,  Rem.-Bal.]  Any  person  who  shall  willfully  de- 
stroy, mutilate,  deface,  injure  or  remove  any  tomb,  monument 
or  gravestone,  or  other  structure  in  any  cemetery,  or  any  fence, 
railing  or  other  work  for  the  protection  or  ornament  of  a 
cemetery  tomb,  monument  or  gravestone  or  other  structure 
aforesaid  or  of  any  cemetery  lot  within  a  cemetery,  or  shall 
willfully  destroy,  cut,  break  or  injure  any  tree,  shrub  or  plant 
within  the  limits  of  a  cemetery  shall  be  deemed  guilty  of  a  mis- 
demeanor and  shall  upon  conviction  thereof  before  any  court 
of  competent  jurisdiction  be  punished  by  a  fine  not  less  than 
five  dollars,  nor  more  than  five  hundred  dollars  and  imprison- 
ment in  the  county  jail  for  a  term  not  less  than  one  nor  more 


487  CEMETERY  ASSOCIATIONS.  §  713 

than  thirty  days,  according  to  the  nature  and  aggravation  of 
the  offense  and  such  offender  shall  also  be  liable  in  an  action 
of  trespass  in  the  name  of  said  association,  to  pay  all  such 
damages  as  have  been  occasioned  by  his  unlawful  act  or  acts, 
which  wrong,  when  recovered,  shall  be  applied  to  the  repara- 
tion and  restoration  of  the  property  destroyed  or  injured  as 
above.     [Laws  1899,  §  7,  p.  47.] 

§  713.  May  Hold  Property  in  Trust  for  Improvement  of 
Cemetery. 
[§  3650,  Rem.-Bal.]  That  all  associations  and  companies 
owning  cemeteries  may  take  and  hold  any  property,  real  and 
personal,  bequeathed  or  given  upon  trust,  to  apply  the  income 
thereof  under  the  direction  of  the  trustees  or  managers  of  such 
associations  or  companies,  for  the  improvement  or  embellish- 
ment of  such  cemeteries,  or  the  erection  or  preservation  of  any 
buildings,  structures,  fences  or  walks  erected  or  to  be  erected 
upon  the  lands  of  such  cemetery  associations  or  companies,  or 
upon  the  lots  or  plots  of  any  of  the  proprietors,  or  for  the  re- 
pair, preservation,  erection  or  renewal  of  any  tomb,  monu- 
ment, gravestone,  fence,  railing,  or  other  erection  in  or  around 
any  cemetery  lot  or  plot,  or  for  planting  and  cultivating  trees, 
shrubs,  flowers  or  plants  in  or  around  any  such  lot  or  plot,  or 
for  improving  or  embellishing  such  cemeteries  or  any  of  the 
lots  or  plots  in  any  other  manner  or  form  consistent  with  the 
design  and  purposes  of  such  associations  and  companies,  ac- 
cording to  the  terms  of  such  grant,  devise  or  bequest.  [Laws 
1905,  §  1,  c.  118.] 


§§  714r-718      EXISTING    CORPORATION    LAWS,    1913.  488 


FEES  AND  LICENSE  TAX. 

§  714.     Filing  Articles  of  Incorporation. 

[§  3709,  Rem -Bal.]  Every  corporation  incorporated  under 
the  laws  of  this  state,  or  of  any  state  or  territory  in  the  United 
States  or  of  any  foreign  state  or  country,  required  by  law  to 
file  articles  of  incorporation  in  the  office  of  the  Secretary  of 
State,  shall  pay  to  the  Secretary  of  State  a  filing  fee  of  twenty- 
five  dollars.     [Laws  1907,  §  1,  p.  270 ;  Bal.,  §  4285.] 

§  715.    Filing  Amendment  or  Supplemental  Articles. 

[§  3710,  Rem.-Bal.]  Every  corporation,  foreign  or  do- 
mestic, desiring  to  file  in  the  office  of  the  Secretary  of  State 
articles  amendatory  or  supplemental,  or  certificates  of  increase 
or  decrease  of  capital  stock  shall  pay  to  the  Secretary  of  State 
a  fee  of  ten  dollars.     [Laws  1907,  §  2,  p.  270 ;  Bal.,  §  4286.] 

§  716.    Filing  Appointment  of  Agent  of  Foreign  Company. 

[§  3711,  Rem.-Bal.]  Every  foreign  corporation  filing  in 
the  office  of  the  Secretary  of  State  a  certificate  of  the  appoint- 
ment of  an  agent  residing  in  this  state,  or  a  certificate  of  the 
revocation  of  such  appointment  of  the  resident  agent,  shall 
pay  to  the  Secretary  of  State  a  fee  of  five  dollars.  [Laws 
1907,  §  3,  p.  270.] 

§  717.     Certified  Copies. 

[§3712,  Rem.-Bal.]  The  fee  for  furnishing  a  certified 
copy  of  articles  of  incorporation,  or  articles  amendatory  or 
supplemental,  or  certificates  of  increase  or  decrease  of  capital 
stock,  or  certificate  of  appointment  of  resident  agent,  or  cer- 
tificate or  revocation  of  appointment  of  resident  agent,  shall 
be  five  dollars.     [Laws  1907,  §  4,  p.  271  j  Bal.,  §  4287.] 

§  718.     Recording  Fees,  When. 

[§  3713,  Rem.-Bal.]  There  shall  be  no  charge  for  record- 
ing any  of  the  documents  mentioned  in  this  act  or  for  making 
or  certifying  to  copies  of  same  other  than  the  fees  in  this  act 


489  FEES   AND  LICENSE   TAX.  §§  719,720 

prescribed,  unless  the  document  to  be  recorded  or  the  copy 
to  be  certified  shall  exceed  twenty  folios,  in  which  case  there 
shall  be  a  further  charge  of  fifteen  cents  per  folio  for  all  such 
excess.     [Laws  1907,  §  5,  p.  271 ;  Bal.,  §  4288.] 

§  719.  License  Fee — Penalty  for  Nonpayment — Building 
and  Loan  Companies  Excepted. 
[§  3714,  Rem.-Bal.]  Every  corporation  incorporated  under 
the  laws  of  this  state,  and  every  foreign  corporation  having 
its  articles  of  incorporation  on  file  in  the  office  of  the  Secretary 
of  State  shall,  on  or  before  the  first  day  of  July  of  each  and 
every  year,  pay  to  the  Secretary  of  State,  for  the  use  of  the 
state,  the  following  license  fees :  Every  corporation  having  a 
capital  stock,  fifteen  dollars.  Every  corporation  failing  to 
pay  the  said  annual  license  fee,  on  or  before  the  first  day  of 
July  of  each  and  every  year,  and  desiring  to  pay  the  same  there- 
after, and  before  the  first  day  of  January  next  following,  shall 
pay  to  the  Secretary  of  State,  for  the  use  of  the  state,  in  addi- 
tion to  the  said  license  fee,  the  following  further  fee,  as  a 
penalty  for  such  failure:  The  sum  of  two  dollars  and  fifty 
cents:  Provided,  however.  That  building  and  loan  companies 
paying  special  fees  provided  for  in  this  act  under  which  same 
are  incorporated  shall  not  be  required  to  pay  the  regular  fee 
provided  herein.     [Laws  1907,  §  6,  p.  271 ;  Bal.,  §  4289.] 

The  year  contemplated  by  the  statute  (Laws  1897,  p.  135,  sec.  5)^ 
for  payment  of  license  fee  is  the  year  beginning  July  1st,  not  the 
calendar  year.  (State  ex  rel.  Sterling  Timber  Co.  v.  Jenkins,  22  Wash. 
494,  61  Pac.  141.) 

Payment  of  license  fee  by  foreign  corporation  is  a  matter  exclusively 
between  state  and  company,  and  cannot  be  raised  by  third  person.  (State 
ex  rel.  Ami  Co.  V.  Superior  Court,  42  Wash.  675,  85  Pac.  669.) 

A  corporation  does  not  wholly  lose  its  right  to  use  of  its  corporate 
name  until  period  for  reinstatement  has  elapsed.  (State  ex  rel. 
Harper  v.  Howell,  56  Wash.  694,  106  Pac.  470.  See  122  Pac.  604;  123 
Pac.  606.) 

§  720.  Shall  not  Maintain  Suit  Unless  License  is  Paid- 
Names  to  be  Stricken  from  Records  by  Secretary 
of  State. 

[§  3715,  Rem.-Bal.]      No  corporation  shall  be  permitted  to 
commence  or  maintain  any  suit,  action  or  proceeding  in  any 


§  720  EXISTING  CORPORATION  LAWS,  1913.  490 

court  of  this  state,  without  alleging  and  proving  that  it  has 
paid  its  annual  license  fee  last  due.  A  certificate  of  the  pay- 
ment of  such  annual  license  fee,  or  anj'  duplicate  of  such  cer- 
tificate under  the  seal  of  the  Secretary  of  State,  shall  be  prima 
facie  evidence  of  such  payment ;  and  the  Secretary  of  State 
is  hereby  required  to  issue  such  duplicate  certificates,  upon 
request,  at  a  charge  of  twenty-five  cents  for  each  thereof.  The 
State  Board  of  Tax  Commissioners  may  institute  suits  to  en- 
force the  payment  of  any  license  fee,  due  from  any  corpora- 
tion, under  this  or  any  other  law.  Failure  upon  the  part  of 
any  corporation  to  pay  its  annual  license  fee  for  a  period  of 
one  year,  from  and  after  the  date  when  such  payment  first 
became  due,  shall  be  prima  facie  evidence  of  the  insolvency 
of  such  corporation,  and  the  fact  of  such  insolvency  may  be 
shown  by  the  state  or  by  any  private  person  or  corporation : 
Provided,  that  as  to  corporations  now  delinquent  in  the  pay- 
ment of  their  annual  license  fees  for  a  period  of  one  or  more 
years,  such  presumption  of  insolvency  shall  not  exist  until 
after  one  year  from  the  date  of  the  passage  of  this  act  and 
the  continuation  of  such  delinquency.  It  shall  be  the  duty 
of  the  Secretary  of  State  to  strike  from  the  records  of  his  office 
the  names  of  all  incorporations  which  have  neglected  for  a 
period  of  two  years  to  pay  their  annual  license  fees;  and  any 
corporation  thereafter  organized  may  take  and  shall  have  the 
exclusive  right  to  use  the  corporate  name  of  any  corporation 
so  stricken  from  the  records :  Provided,  that  no  corporate 
name  shall  be  so  stricken  from  the  records  for  a  period  of 
one  year  from  the  date  of  the  passage  of  this  act.  [Laws 
1907,  §  7,  p.  271.] 

Forfeiture  for  failure  to  pay  license  fees  violates  no  contract  rights 
of  creditors.  (Hawley  v.  Bonanza  Queen  Min.  Co.,  61  Wash.  90,  111 
Pac.  1073.) 

This  provision  only  goes  to  the  capacity  to  sue,  and  is  waived  unless 
raised  by  demurrer  or  answer.  (Pierson  v.  Northern  Pac.  E.  Co.,  61 
Wash.  450,  452,  112  Pac.  509,  511;  Thompson-Spencer  Co.  v.  Thompson, 
61  Wash.  547,  112  Pac.  655.) 

Compliance  with  the  section  is  not  necessary  in  case  of  a  foreign 
corporation  not  "doing  business  within  the  state."  (Lilly-Brackett  Co. 
V.  Sonnemann,  50  Wash.  487,  97  Pac.  506.) 


491  FEES   AND  LICENSE   TAX.  §§  721-723 

Whenever  in  the  course  of  the  case  it  appears  that  the  defendant  set- 
ting up  a  counterclaim  is  in  default  in  payment  of  a  license  fee,  the 
defendant  cannot  maintain  further  chum  to  affirmative  relief.  (North 
Star  etc.  Co.  v.  Alaska  Yukon  etc.  Co.,  63  Wash.  376,  115  Pac.  855.) 

The  section  held  to  apply  to  foreign  corporation  maintaining  marine 
superintendent  at  port  in  state.  (Boston  Towboat  Co.  v.  Sesnon  Co., 
64  Wash.  375,  116  Pac.  1083.) 

A  coal  mining  company  is  not  within  this  section.  (Davies  v.  Ball, 
64  Wash.  292,  116  Pac.  833.) 

§  721.     Reinstatement  of  Delinquent  Corporation. 

[§  3715a,  Rem.-Bal.]  Every  corporation  whose  name  has 
been  or  shall  hereafter  be,  stricken  from  the  records  of  the 
office  of  the  Secretary  of  State  in  pursuance  of  law  for  failure 
to  pay  its  annual  license  fee  for  two  years  is  hereby  author- 
ized and  permitted  to  apply  to  the  Secretary  of  State  for 
reinstatement  at  any  time  within  six  months  from  the  ap- 
proval of  this  act,  or  within  six  months  after  its  name  has 
been  stricken  from  the  records  of  the  office  of  the  Secretary 
of  State.     [Laws  1909,  Sp.  Sess.,  §  1,  p.  57.] 

§  722.     Condition — Prepayment  of  Fees  and  Penalty. 

[§  3715b,  Rem.-Bal.]  Any  corporation  so  applying  for  re- 
instatement shall  at  the  time  of  its  application  pay  to  the 
Secretary  of  State,  for  the  use  of  the  state,  all  license  fees  and 
penalties  then  due  from  it  and  the  sum  of  twenty-five  dollars 
as  additional  penalty,  and  upon  the  making  of  such  applica- 
tion and  such  payment,  it  shall  be  the  duty  of  the  Secretary 
of  State  to  enter  upon  his  records  a  notation  that  such  cor- 
poration is  reinstated.     [Laws  1909,  Sp.  Sess.,  §  2,  p.  57.] 

This  section  repealed  by  Laws  1911,  §2,  p.  135;  ruling  of  Attorney 
General. 

§  723.     Rights  Restored.    ^ 

[§  3715c,  Rem.-Bal.]  Thereafter  such  corporation  shall 
have  and  enjoy  the  same  rights  and  powers  as  if  its  name  had 
never  been  stricken  from  the  records,  and  all  things  done  by 
it  in  the  exercise  of  its  corporate  powers  before  such  reinstate- 
ment are  hereby  validated  and  confirmed.  [Laws  1909,  Sp. 
Sess.,  §  3,  p.  57.] 


§§  724r-727    EXISTING  corporation  laws,  1913.  492 

§  724.     Dissolution  for  Nonpayment. 

[§  3715d,  Rem.-Bal.]  If,  however,  within  the  period  named 
within  which  a  corporation  may  make  application  to  be  rein- 
stated such  corporation  shall  not  have  made  such  application, 
the  Secretary  of  State  shall  enter  upon  his  records  a  notation 
that  such  corporation  is  dissolved,  and  it  shall  thereupon  be 
dissolved  and  the  trustees  of  such  corporation  shall  hold  the 
title  to  the  property  of  the  corporation  for  the  benefit  of  its 
stockholders  and  creditors  to  be  disposed  of  under  appropriate 
court  proceedings.     [Laws  1909,  Sp.  Sess.,  §  4,  p.  57.] 

See  Laws  1911,  §  2,  p.  135. 

§  725.    Adoption  of  Name  of  Delinquent  Corporation. 

[§3715e,  Rem.-Bal.]  The  name  of  no  corporation  which 
has  been  stricken  from  the  records  of  the  office  of  Secretary  of 
State  for  nonpayment  of  its  annual  license  tax  shall  be  adopted 
by  another  corporation  until  the  expiration  of  the  time  within 
which  such  delinquent  corporation  is  allowed  in  which  to  apply 
for  reinstatement,  or  while  such  application  for  reinstatement 
is  pending.     [Laws  1909,  Sp.  Sess.,  §  5,  p.  58.] 

§  726.     Fee  for  Certifying  Corporation  Laws. 

[§  3716,  Rem.-Bal.]  The  fee  for  furnishing  and  certifying 
to  a  printed  compilation  of  the  corporation  laws  of  this  state 
shall  be  five  doUars.     [Laws  1907,  §  8,  p.  272.] 

§  727.     Not  to  Apply  to  Certain  Corporations. 

[§  3717,  Rem.-Bal.]  This  act  shall  not  apply  to  domestic 
corporations  organized  for  religious,  social,  charitable  or  edu- 
cational purposes,  or  to  foreign  corporations  organized  for 
like  purposes,  when  not  engaged  in  this  state  in  the  loaning 
of  money  or  the  conducting  of  any  other  business  pursuits  for 
profit.     [Laws  1907,  §  9,  p.  272;  Bal.,  §  4290.] 


493  REINSTATEMENT  PROVISIONS.  §§  728,  729 


REINSTATEMENT  PROVISIONS. 

§  728.     Application  for  Reinstatement — Dissolution. 

That  section  3715a  of  Remington  and  Ballinger's  Annotated 
Codes  and  Statutes  of  Washington  be,  and  the  same  is  hereby, 
amended  to  read  as  follows:  Section  3715a.  Every  corpora- 
tion whose  name  has  been,  or  shall  hereafter  be,  stricken  from 
the  records  of  the  office  of  the  Secretary  of  State  in  pur.su- 
ance  of  law  for  failure  to  pay  its  annual  license  fee  for  two 
years  is  hereby  authorized  and  permitted  to  apply  to  the 
Secretary  of  State  for  reinstatement  at  any  time  after  its 
name  has  been  stricken  from  the  records  of  the  office  of  the 
Secretary  of  State.  Any  corporation  stricken  from  the  rec- 
ords and  dissolved,  as  provided  in  this  chapter  may  at  any 
time  thereafter  hold  a  meeting  of  stockholders,  in  the  same 
manner  as  provided  during  its  corporate  existence,  and  pass 
such  resolutions  as  may  be  necessary  to  close  out  its  affairs 
and  wind  up  the  business  of  such  corporation  and  where  such 
stricken  and  dissolved  corporation  has  heretofore  held  such 
meetings  of  stockholders  for  the  purpose  of  passing  resolutions 
to  wind  up  their  affairs,  such  method  of  procedure  is  hereby 
validated  and  approved.     [Laws  1911,  p.  135,  §  1.] 

§  729.     Penalties  to  be  Paid  for  Reinstatement. 

That  section  3715b  of  Remington  and  Ballinger's  Anno- 
tated Codes  and  Statutes  of  Washington  be,  and  the  same  is 
hereby,  amended  to  read  as  follows :  Section  3715b.  Any  cor- 
poration so  applying  for  reinstatement  shall  at  the  time  of  its 
application  pay  to  the  Secretary  of  State,  for  the  use  of  the 
state,  all  license  fees  and  penalties  then  due  from  it  and  the 
sum  of  one  hundred  dollars  as  additional  penalty:  Provided, 
that  this  shall  apply  to  the  reinstatement  of  corporations,  the 
names  of  which  shall  have  been  stricken  at  the  present  time, 
and  hereafter  whenever  any  corporation  shall  have  its  name 
stricken  from  the  records  by  the  Secretary  of  State  it  shall, 
in  applying  for  reinstatement,  pay  all  license  fees  and  penal- 
ties then  due  from  it  and  the  additional  sum  of  twenty  dollars 


§§730,731      EXISTING    CORPORATION    LAWS,    1913.  494 

for  each  and  every  year  that  its  name  has  been  stricken  from 
the  records,  and  upon  the  making  of  such  application  and 
such  payment,  it  shall  be  the  duty  of  the  Secretary  of  State 
to  enter  upon  his  records  a  notation  that  such  corporation  is 
reinstated.     [Laws  1911,  §  2,  p.  135.] 

§  730.     All  Fees  shall  be  Paid  in  Advance. 

[§3718,  Eem.-Bal.]  All  fees  provided  for  in  this  act  are 
due  in  advance  and  shall  be  paid  to  the  Secretary  of  State 
before  the  services  desired  are  performed.  [Laws  1907,  §  10, 
p.  274.] 

§  731.     Corporation  Charged  with  Crime. 

Section  1.  Whenever  an  indictment  or  information  shall 
be  filed  in  any  superior  court  against  a  corporation  charging 
it  with  the  commission  of  a  crime,  a  summons  shall  be  issued 
by  the  clerk  of  such  court,  signed  by  one  of  the  judges  thereof, 
commanding  the  sheriff  forthwith  to  notify  the  accused 
thereof,  and  commanding  it  to  appear  before  such  court  at 
such  time  as  shall  be  specified  in  said  summons.  Such  sum- 
mons and  a  copy  of  the  indictment  or  information  shall  be  at 
once  delivered  by  such  clerk  to  said  sheriff  and  by  him  forth- 
with served  and  returned  in  the  manner  provided  for  service 
of  summons  upon  such  corporation  in  a  civil  action.  When- 
ever a  complaint  against  a  corporation,  charging  it  with  the 
commission  of  a  crime,  shall  be  made  before  any  justice  of  the 
peace  or  municipal  judge,  a  like  summons,  signed  by  such 
justice  of  the  peace  or  municipal  judge,  shall  be  issued,  which, 
together  with  a  copy  of  said  complaint,  shall  be  delivered  to 
the  sheriff  at  once  and  by  him  forthwith  served  as  herein  pro- 
vided.    [Laws  1911,  §  1,  p.  106.] 

Sec.  2.  Upon  such  service  being  made  such  corporation 
shall  appear  at  the  time  designated,  by  one  of  its  officers  or  by 
counsel ;  and  upon  such  appearance,  and  thereafter,  the  same 
course  shall  be  pursued,  as  nearly  as  may  be,  as  upon  the  ap- 
pearance of  an  individual  to  indictment,  information  or  com- 
plaint and  warrant  charging  him  with  the  same  offense.  Upon 
failure  of  the  corporation  to  make  such  appearance  said  court 


495  REINSTATEMENT  PROVISIONS.  §  731 

shall  cause  to  be  entered  a  plea  of  "not  guilty,"  and  upon  ap- 
pearance made  or  plea  entered  the  corporation  shall  be  deemed 
forthwith  continuously  present  in  court  until  the  case  shall  be 
finally  disposed  of.      [Laws  1911,  §  2,  p.  107.] 

Sec.  3.  If  the  corporation  shall  be  found  guilty  and  a  fine 
imposed,  it  shall  be  entered  and  docketed  by  the  clerk,  or  jus- 
tice of  the  peace  or  municipal  judge  as  a  judgment  against 
the  corporation,  and  it  shall  be  of  the  same  force  and  effect 
and  be  enforced  against  such  corporation  in  the  same  manner 
as  a  judgment  in  a  civil  action.     [Laws  1911,  §  3,  p.  107. j 


§§  732-735    EXISTING  corporation  laws,  1913.  496 


CONSTITUTIONAL  PROVISIONS. 

§  732.    Not  to  be  Created  by  Special  Laws. 

Corporations  may  be  formed  under  general  laws,  but  shall 
not  be  created  by  special  acts.  All  laws  relating  to  corpora- 
tions may  be  altered,  amended,  or  repealed  by  the  legislature 
at  any  time,  and  all  corporations  doing  business  in  this  state 
may,  as  to  such  business,  be  regulated,  limited,  or  restrained 
by  law.     [§  1,  Art.  XII,  State  Const.] 

A  special  charter  is  not  repealed  by  a  subsequent  general  incorpora- 
tion act.     (Cascades  R.  Co.  v.  Sohms,  1  Wash.  Ter.  557.) 

§  733.  Legislature  shall  not  Extend  Franchise  or  Remit 
Forfeiture. 
The  legislature  shall  not  extend  any  franchise  or  charter, 
nor  remit  the  forfeiture  of  any  franchise  or  charter  of  any 
corporation  now  existing  or  which  shall  hereafter  exist  under 
the  laws  of  this  state.     [§  3,  Art.  XII,  State  Const.] 

§  734.    Liability  of  Stockholders. 

Each  stockholder  in  all  incorporated  companies,  except  cor- 
porations organized  for  banking  or  insurance  purposes,  shall 
be  liable  for  the  debts  of  the  corporation  to  the  amount  of  his 
unpaid  stock,  and  no  more,  and  one  or  more  stockholders  may 
be  joined  as  parties  defendant  in  suits  to  recover  upon  his 
liability.     [§  4,  Art.  XII,  State  Const.] 

Agreement  by  corporation  not  to  engage  in  a  particular  business  is 
inoperative  against  the  stockholders  of  the  company  individually. 
(Murray  v.  O'Kanagan  Livestock  etc.  Co.,  12  Wash.  259,  40  Pac.  942.) 

§  735.     Corporation  Construed  to  Include  What. 

The  term  "corporations,"  as  used  in  this  article,  shall  be 
construed  to  include  all  associations  and  joint  stock  companies 
having  any  powers  or  privileges  of  corporations  not  possessed 
by  individuals  or  partnerships,  and  all  corporations  shall  have 
the  right  to  sue  and  shall  be  subject  to  be  sued,  in  all  courts, 
in  like  cases  as  natural  persons.     [§  5,  Art.  XII,  State  Const.] 


497  CONSTITUTIONAL  PROVISIONS.  §§  736, 737 

§  736.     Corporation  Stock,  Fictitious  Issue  Void. 

Corporations  shall  not  issue  stock,  except  to  bona  fide  sub- 
scribers therefor ;  or  their  assignees ;  nor  shall  any  corporation 
issue  any  bond,  or  other  obligation,  for  the  payment  of  money, 
except  for  money  or  property  received  or  labor  done.  The 
stock  of  corporations  shall  not  be  increased,  except  in  pursu- 
ance of  a  general  law,  nor  shall  any  law  authorize  the  increase 
of  stock,  without  the  consent  of  the  person  or  persons  holding 
the  larger  amount  in  value  of  the  stock,  nor  without  due  no- 
tice of  the  proposed  increase  having  been  previously  given 
in  such  manner  as  may  be  prescribed  by  law.  All  fictitious 
increase  of  stock  or  indebtedness  shall  be  void.  [§  6,  Art. 
XII,  State  Const.] 

Property  may  be  taken  in  payment  for  a  stock  subscription.  (Man- 
hattan Trust  Co.  V.  Seattle  Coal  &  Iron  Co.,  16  Wash.  499,  48  Pac.  333, 
737.) 

Property  taken  in  payment  of  stock  must  be  fairly  valued  and  stock- 
holder's valuation  is  not  conclusive.  (Dunlap  v.  Eauch,  24  Wash.  620, 
64  Pac.  807;  Manhattan  Trust  Co.  v.  Seattle  Coal  &  Iron  Co.,  19  Wash. 
493,  53  Pac.  951.) 

Where  fully  paid  stock  is  issued  for  property,  there  must  be  actual 
fraud  to  enable  creditors  to  call  stockholders  to  account  or  for  unpaid 
subscriptions.      (Turner  v.  Bailey,  12  Wash.  634,  42  Pac.  115.) 

Stock  subscriptions  must  be  fully  paid  in  property  or  cash,  irre- 
spective of  understandings  among  the  stockholders.  (Adamant  Mfg. 
Co.  V.  Wallace,  16  Wash.  614,  48  Pac.  415.) 

Where  stock  is  fully  paid  by  property  at  its  fair  valuation,  the 
stockholders  do  not  become  subsequently  liable  by  the  subsequent  de- 
preciation of  the  property.  (Turner  v.  Bailey,  12  Wash.  634,  42  Pac. 
115.) 

The  fact  that  a  stock  certificate  purports  on  its  face  to  be  fully  paid 
is  not  conclusive.     (Elderkin  v.  Peterson,  8  Wash.  674,  36  Pac.  1089.) 

Stock  issued  to  promoters  for  property  not  canceled  in  absence  of 
actual  fraud.  (Inland  Nursery  &  Floral  Co.  v.  Eice,  57  Wash.  67,  106 
Pae.  499.) 

§  737.    Foreign  Corporations  shall  Conform  to  State  Laws. 

No  corporation  organized  outside  the  limits  of  this  state 
shall  be  allowed  to  transact  business  within  the  state  on  more 
favorable  conditions  than  are  prescribed  by  law  to  similar  cor- 
porations organized  under  the  laws  of  this  state.  [§  7,  Art. 
XII,  State  Const.] 
32 


§§  738-741      EXISTING    CORPORATION    LAWS,    1913.  498 

§  738.     Leasing  or  Alienation  of  Franchises. 

No  corporation  shall  lease  or  alienate  any  franchise,  so  as  to 
release  the  franchise,  or  property  held  thereunder,  from  the 
liabilities  of  the  lessor,  or  grantor,  lessee,  or  grantee,  con- 
tracted or  incurred  in  the  operation,  use,  or  enjoyment  of  such 
franchise  or  any  of  its  privileges.  [§  8,  Art.  XII.  State 
Const.] 

Transfer  of  property  for  payment  of  debts  not  prevented  by  article 
12,  section  8,  constitution,  in  alienation  of  corporate  franchise. 
(Klosterman  v.  Mason  County  etc.  E.  Co.,  8  Wash.  281,  36  Pac.  136.) 

Rule  that  corporation  may  not  assign  its  corporate  privileges  and 
franchises  does  not  apply  to  franchises  granted  by  city  which  come 
under  section  1500,  General  Statutes.  (Commercial  Elec.  L.  &  P.  Co. 
V.  Tacoma,  17  Wash.  661,  50  Pac.  592.) 

§  739.     State  shall  not  Loan  Its  Credit  to  Corporations. 

The  state  shall  not  in  any  manner  loan  its  credit,  nor  shall  it 
subscribe  to,  or  be  interested  in,  the  stock  of  any  company, 
association  or  corporation.     [§  9,  Art.  XII,  State  Const.] 

§  740.    Eminent  Domain,  State  may  Exercise  Right  Against 
Corporations. 

The  exercise  of  the  right  of  eminent  domain  shall  never  be 
so  abridged  or  construed  as  to  prevent  the  legislature  from 
taking  the  property  and  franchises  of  incorporated  companies, 
and  subjecting  them  to  public  use  the  same  as  the  property  of 
individuals.     [§  10,  Art.  XII,  State  Const.] 

§  741.     Liability  of  Stockholders. 

No  corporation,  association,  or  individual  shall  issue  or  put 
in  circulation  as  money  anything  but  the  lawful  money  of  the 
United  States.  Each  stockholder  of  any  banking  or  insurance 
corporation  or  joint  stock  association  shall  be  individually  and 
personally  liable,  equally  and  ratably,  and  not  one  for  another, 
for  all  contracts,  debts  and' engagements  of  such  corporation 
or  association  accruing  while  they  remain  such  stockholders,  to 
the  extent  of  the  amount  of  their  stock  therein  at  the  par 
value  thereof,  in  addition  to  the  amount  invested  in  such 
shares.     [§  11,  Art.  XII,  State  Const.] 


499  CONSTITUTIONAL.  PROVISIONS.  §§742,743 

The  liability  imposed  by  statute  is  secondary,  as  that  of  surety 
(Wilson  V.  Book,  13  Wash.  676,  43  Pac.  939;  Watterson  v.  Masterson, 
15  Wash.  511,  46  Pac.  1041),  but  this  does  not  affect  the  time  and 
manner  of  enforcement  by  suit  (Bennett  v.  Thorne,  36  Wash.  253,  78 
Pac.  936);  the  additional  liability  is  personal.  (Shuey  v.  Holmes,  21 
Wash.  223,  57  Pac.  818;  Shuey  v.  Adair,  24  Wash.  378,  64  Pac.  536.) 

§  742.     Insolvent  Banks  shall  not  Receive  Deposits. 

Any  president,  director,  manager,  cashier,  or  other  officer 
of  any  banking  institution  who  shall  receive  or  assent  to  the 
reception  of  deposits  after  he  shall  have  knowledge  of  the  fact 
that  such  banking  institution  is  insolvent  or  in  failing  circum- 
stances shall  be  individually  responsible  for  such  deposits  so 
received.     [§  12,  Art.  XII,  State  Const.] 

This  section  does  not  preclude  criminal  liability.  (State  v.  Oleson, 
35  Wash.  149,  76  Pac.  686.) 

§  743.     Common  Carriers — Rights — Duties. 

All  railroad,  canal,  and  other  transportation  companies  are 
declared  to  be  common  carriers  and  subject  to  legislative  con- 
trol. Any  association  or  corporation  organized  for  the  pur- 
pose, under  the  laws  of  the  state,  shall  have  the  right  to  con- 
nect at  the  state  line  with  railroads  of  other  states.  Every 
railroad  company  shall  have  the  right  with  its  road,  whether 
the  same  is  now  constructed  or  may  hereafter  be  constructed, 
to  intersect,  cross,  or  connect  with  any  other  railroad,  and 
when  such  railroads  are  of  the  same  or  similar  gauge  they 
shall,  at  all  crossings  and  at  all  points  where  a  railroad  shall 
begin  or  terminate  at  or  near  any  other  railroad,  form  proper 
connections,  so  that  the  cars  of  any  such  railroad  companies 
may  be  speedily  transferred  from  one  railroad  to  another. 
All  railroad  companies  shall  receive  and  transport  each  the 
other's  passengers,  tonnage,  and  cars,  without  delay  or  dis- 
crimination.    [§  13,  Art.  XII,  State  Const.] 

Kailways  are  common  carriers.  (Cogswell  v.  West  St.  &  E.  Co.,  5 
Wash.  46,  31  Pac.  411;  Boyle  v.  Gt.  North.  E.  Co.,  13  Wash.  383,  43  Pac. 
344;  State  ex  rel.  Grinsfelder  v.  Spokane  St.  R.  Co.,  19  Wash.  518,  53 
Pac.  719.) 

An  irrigation  company  is  a  common  carrier.  (Prescott  Irr.  Co.  v. 
Flathers,  20  Wash.  454,  55  Pac.  635.) 


§§  743a-745    existing  corporation  laws,  1913.  500 

An  owner  of  an  office  building  operating  an  elevator  is  a  common 
carrier.      (Edwards  v.  Burke,  36  Wash.  107,  78  Pac.  610.) 

Right  of  railroad  to  cross  another  does  not  justify  longitudinal  tak- 
ing.    (Seattle  &  M.  R.  Co.  v.  State,  7  Wash.  150,  34  Pac.  551.) 

Great  necessity  must  be  shown  to  justify  condemnation  of  terminal 
grounds.  (State  ex  rel.  Spokane  Falls  &  N.  E.  Co.  v.  Superior  Court, 
40  Wash.  389,  82  Pac.  417.) 

§  743a.     Certain  Combinations  Forbidden. 

No  railroad  company  or  other  common  carrier  shall  combine 
or  make  any  contract  with  the  owners  of  any  vessel  that  leaves 
port  or  makes  port  in  this  state,  or  with  any  common  carrier, 
by  which  combination  or  contract  the  earnings  of  one  doing 
the  carrying  are  to  be  shared  by  the  other  not  doing  the  carry- 
ing.    [§  14,  Art.  XII,  State  Const.] 

Construction  by  competing  lines  of  new  line  opening  new  territory 
does  not  violate  this  section.  (State  ex  rel.  Cascade  R.  Co.  v.  Superior 
Court,  51  Wash.  346,  98  Pac.  739.) 

§  744.    Discrimination  in  Rates  Forbidden. 

No  discrimination  in  charges  or  facilities  for  transportation 
shall  be  made  by  any  railroad  or  other  transportation  com- 
pany between  places  or  persons,  or  in  the  facilities  for  the 
transportation  of  the  same  classes  of  freight  or  passengers 
within  the  state,  or  coming  or  going  to  any  other  state.  Per- 
sons and  property  transported  over  any  railroad,  or  by  any 
other  transportation  company,  or  individual,  shall  be  delivered 
at  any  station,  landing  or  port,  at  charges  not  exceeding  the 
charges  for  the  transportation  of  persons  and  property  of  the 
same  class,  in  the  same  direction  to  any  more  distant  station, 
port  or  landing.  Excursion  and  commutation  tickets  may  be 
issued  at  special  rates.     [§  15,  Art.  XII,  State  Const.] 

This  section  is  limited  to  construction  of  legislature  in  statute;  not 
self-executing.  (Northwestern  Warehouse  Co.  v.  Oregon  R.  &  Nav. 
Co.,  32  Wash.  218,  73  Pac.  388.) 

§  745.     Shall  not  Consolidate. 

No  railroad  corporation  shall  consolidate  its  stock,  property 
or  franchise  with  any  other  railroad  corporation  owning  a 
competing  line.     [§  16,  Art.  XII,  State  Const.] 


501  CONSTITUTIONAL  PROVISIONS.  §§  746-748 

§  746.     Rolling  Stock,  etc.,  Considered  to  be  Personal  Prop- 
erty. 

The  rolling  stock  and  other  movable  property  belonging  to 
any  railroad  company  or  corporation  in  this  state  shall  be  con- 
sidered personal  property,  and  shall  be  liable  to  taxation  and 
to  execution  and  sale  in  the  same  manner  as  the  personal  prop- 
erty of  individuals,  and  such  property  shall  not  be  exempted 
from  execution  and  sale.     [§  17,  Art.  XII,  State  Const.] 

§  747.     Regulation  of  Fares  and  Freights  by  Legislature. 

The  legislature  shall  pass  laws  establishing  reasonable  maxi- 
mum rates  of  charges  for  the  transportation  of  passengers  and 
freight,  and  to  correct  abuses,  and  to  prevent  discrimination 
and  extortion  in  the  rates  of  freight  and  passenger  tariffs  on 
the  different  railroads  and  other  common  carriers  in  the  state, 
and  shall  enforce  such  laws  by  adequate  penalties.  A  rail- 
road and  transportation  commission  may  be  established  and  its 
powers  and  duties  fully  defined  by  law.  [§  18,  Art.  XII,  State 
Const.] 

This  section  does  not  prevent  the  delegation  of  rate-making  to  a 
commission.  (Great  Northern  R.  Co.  v.  E.  R.  Commission,  52  Wash. 
33,  lOO  Pac.  184.) 

§  748.    Telegraph  and  Telephone  Companies. 

Any  association  or  corporation,  or  the  lessees  or  managers 
thereof,  organized  for  the  purpose,  or  any  individual,  shall 
have  the  right  to  construct  and  maintain  lines  of  telegraph 
and  telephone  within  this  state,  and  said  companies  shall  re- 
ceive and  transmit  each  other's  messages  without  delay  or  dis- 
crimination, and  all  such  companies  are  hereby  declared  to  be 
common  carriers  and  subject  to  legislative  control.  Railroad 
corporations  organized  or  doing  business  in  this  state  shall 
allow  telegraph  and  telephone  corporations  and  companies  to 
construct  and  maintain  telegraph  lines  on  and  along  the  rights 
of  way  of  such  railroads  and  railroad  companies,  and  no  rail- 
road corporation  organized  or  doing  business  in  this  state  shall 
allow  any  telegraph  corporation  or  company  any  facilities, 
privileges,  or  rates  for  transportation  of  men  or  material,  or 
for  repairing  their  lines,  not  allowed  to  all  telegraph  com- 


§§  749-751      EXISTING    CORPORATION   LAWS,    1913,  502 

panies.  The  right  of  eminent  domain  is  hereby  extended  to 
all  telegraph  and  telephone  companies.  The  legislature  shall, 
by  general  law,  of  uniform  operation,  provide  reasonable  regu- 
lations to  give  effect  to  this  section.  [§  19,  Art.  XII,  State 
Const.] 

Not  self-executing.  City  may  decline  to  grant  franchise.  (State 
ex  rel.  Spokane  etc.  Tel.  Co.  v.  Spokane,  24  Wash.  53,  63  Pac.  1116.) 

§  749.     Free  Passes — Discrimination  Forbidden. 

No  railroad  or  other  transportation  company  shall  grant 
free  passes,  or  sell  tickets  or  passes  at  a  discount,  other  than 
as  sold  to  the  public  generally,  to  any  member  of  the  legis- 
lature, or  to  any  person  holding  any  public  office  within  this 
state.  The  legislature  shall  pass  laws  to  carry  this  provision 
into  effect.     [§  20,  Art.  XII,  State  Const.] 

A  public  officer  traveling  on  pass  estopped  from  setting  up  its  in- 
validity.    (Muldoon  V.  Seattle  City  Ry.  Co.,  10  Wash.  311,  38  Pac.  995.) 

§  750.     Railroads  shall  not  Discriminate  Against  Any  Ex- 
press Company. 

Railroad  companies  now  or  hereafter  organized  or  doing 
business  in  this  state,  shall  allow  all  express  companies  organ- 
ized or  doing  business  in  this  state,  transportation  over  all  lines 
of  railroad  owned  or  operated  by  such  railroad  companies  upon 
equal  terms  with  any  other  express  company,  and  no  railroad 
corporation  organized  or  doing  business  in  this  state  shall 
allow  any  express  corporation  or  company  any  facilities,  privi- 
leges, or  rates  for  transportation  of  men  or  materials  or  prop- 
erty carried  by  them,  or  for  doing  the  business  of  such  express 
companies,  not  allowed  to  all  express  companies.  [§  21,  Art. 
XII,  State  Const.] 

§  751.     Trusts  and  Monopolies  Forbidden. 

Monopolies  and  trusts  shall  never  be  allowed  in  this  state, 
and  no  incorporated  company,  copartnership,  or  association 
of  persons  in  this  state  shall  directly  or  indirectly  combine  or 
make  any  contract  with  any  other  incorporated  company, 
foreign  or  domestic,  through  their  stockholders,  or  the  trus- 


503  CONSTITUTIONAL  PROVISIONS.  §  751 

tees  or  assignees  of  such  stockholders,  or  with  any  copartner- 
ship or  association  of  persons,  or  in  any  manner  whatever,  for 
the  purpose  of  fixing  the  price  or  limiting  the  production  or 
regulating  the  transportation  of  any  product  or  commodity. 
The  legislature  shall  pass  laws  for  the  enforcement  of  this 
section  by  adequate  penalties,  and  in  case  of  incorporated  com- 
panies, if  necessary  for  that  purpose,  may  declare  a  forfeiture 
of  their  franchise.     [§22,  Art.  XII,  State  Const.] 

Street  railway  franchise  permitting  consolidation  of  competing  lines 
does  not  violate  this  section.  (Wood  v.  Seattle,  23  Wash.  1,  62  Pac. 
135.) 

Held,  monopoly  in  warehouse  business  not  shown.  (Northwest 
Warehouse  Co.  v.  Oregon  E.  &  N.  Co.,  32  Wash.  218,  73  Pac.  388.) 

Section  8100,  Eemington  and  Ballinger's  Code,  providing  for  excava- 
tion of  waterways,  does  not  violate  this  section.  (Seattle  &  Lake 
Wash.  Waterway  Co.  v.  Seattle  Dock  Co.,  35  Wash.  503,  77  Pac.  845.) 

Boom  company.  (Nicomen  Boom  Co.  v.  North  Shore  etc.  Co.,  40 
Wash.  315,  82  Pac.  412.) 


505  CROSS-REFERENCES. 


CEOSS-REFERENCES 

TO 

Rem.-Bal.  Code  and  Secretary  of  State's  Compilation. 


Eem.-Bal. 

Secretary  of  State. 

Mclntire. 

921 

63 

463 

922 

64 

464 

923 

— 

464a 

924 

65 

465 

925 

66 

466 

926 

67 

467 

927 

68 

468 

928 

— 

468a 

929 

69 

469 

930 

70 

470 

931 

71 

471 

932 

72 

472 

933 

73 

473 

934 

87 

487 

935 

88 

488 

936 

89 

489 

1700 

298 

698 

1701 

299 

699 

1702 

300 

700 

1703 

301 

701 

1704 

302 

702 

1705 

303 

703 

1706 

304 

704 

1707 

305 

705 

2638 

39 

439 

2639 

40 

440 

2640 

41 

441 

2641 

42 

442 

2642 

43 

443 

2643 

44 

444 

2644 

45 

445 

EXISTING  CORPORATION  LAWS,  1913.  506 


Kem.-Bal. 

Secretary  of  State. 

Mclntire. 

2645 

46 

446 

2646 

47 

447 

2647 

48 

448 

2648 

49 

449 

2649 

50 

450 

3290 

205 

605 

3291 

206 

606 

3292 

207 

607 

3293 

208 

608 

3294 

209 

609 

3295 

238 

633 

3296 

239 

639 

3297 

240 

640 

3298 

241 

641 

3299 

242 

642 

3300 

243 

643 

3301 

244 

644 

3302 

245 

645 

3303 

246 

646 

3304 

247 

647 

3305 

248 

648 

3306 

249 

649 

3307 

250 

650 

3308 

251 

651 

3309 

252 

652 

3310 

253 

653 

3311 

254 

654 

3313 

255 

655 

3314 

256 

656 

3315 

210 

610 

3316 

211 

611 

3317 

212 

612 

3318 

213 

613 

3319 

214 

614 

3320 

215 

615 

3321 

216 

616 

3322 

217 

617 

3323 

218 

618 

3324 

219 

619 

507  CROSS-REFERENCES. 


em.-Ral. 

Secretary  of  State. 

Melntire. 

3325 

220 

620 

3326 

221 

621 

3327 

222 

622 

3328 

223 

623 

3329 

224 

624 

3330 

225 

625 

3331 

226 

626 

3332 

227 

627 

3333 

228 

628 

3334 

229 

629 

3335 

230 

630 

3336 

231 

631 

3337 

232 

632 

3338 

233 

633 

3339 

234 

634 

3340 

634a 

3341 

235 

635 

3342 

236 

636 

3343 

237 

637 

3344 

261 

661 

3345 

262 

662 

3346 

188 

588 

3347 

189 

589 

3348 

190 

590 

3349 

191 

591 

3350 

192 

592 

3351 

193 

593 

3352 

194 

594 

3353 

195 

595 

3354 

196 

596 

3355 

197 

597 

3356 

198 

598 

3357 

199 

599 

3358 

200 

600 

3359 

201 

601 

3360 

202 

602 

3361 

203 

603 

3362 

204 

604 

3363 

602a 

EXISTING  CORPORATION  LAWS,  191S.  508 


Eem.-Bal. 

Secretary  of  State. 

Mclntire. 

3364 

603a 

3365 

259 

659 

3366 

260 

660 

3367 

257 

657 

3368 

258 

658 

3602 

151 

574 

3603 

152 

551 

3604 

153 

557 

3605 

154 

560 

3606 

155 

558 

3607 

156 

559 

3608 

157 

558,  572 

3614 

163 

570 

3618 

167 

567 

3620 

169 

569 

3623 

172 

571 

3626 

175 

555 

3627 

176 

556,  565 

3631 

180 

564 

3633 

182 

575 

3634 

183 

566 

3643 

306 

706 

3644 

307 

707 

3645 

308 

708 

3646 

309 

709 

3647 

310 

710 

3649 

311 

711 

3650 

313 

713 

3651 

312 

712 

3677 

1 

401 

3678 

31 

431 

3679 

2 

402 

3680 

37 

437 

3681 

30 

430 

3682 

5 

405 

3683 

6 

406 

3684 

8 

408 

3685 

35 

435 

509  CROSS-REFERENCES. 


Eem.-Bal. 

Secretary  of  State. 

McTntire. 

3686 

7 

407 

3687 

9 

409 

3688 

10 

410 

3689 

12 

412 

3690 

11 

411 

3691 

3 

403 

3692 

4 

404 

3693 

13 

413 

3694 

14 

414 

3695 

15 

415 

3696 

16 

416 

3697 

17 

417 

3698 

18 

418 

3699 

36 

436 

3700 

19 

419 

3701 

20 

420 

3702 

21 

421 

3703 

38 

438 

3704 

24 

424 

3705 

25 

425 

3706 

26 

426 

3707 

27 

427 

3708 

28 

428 

37081/2 

29 

429 

3709 

314 

714 

3710 

315 

715 

3711 

316 

716 

3712 

317 

717 

3713 

318 

718 

3714 

319 

719 

3715 

320 

720 

3715a 

321 

721 

3715b 

322 

722 

3715c 

323 

723 

3715d 

324 

724 

3715e 

325 

725 

3716 

326 

726 

3717 

327 

727 

3718 

330 

730 

EXISTING  CORPORATION  LAWS,  1913.  510 


Eem.-Bal. 

Secretary  of  State. 

Mclntire. 

3720 

52 

452 

3721 

53 

453 

3722 

54 

454 

3723 

55 

455 

3724 

56 

456  . 

3725 

57 

457 

3726 

58 

458 

3727 

59 

459 

3728 

459a 

3729 

60 

460 

3730 

61 

461 

3731 

277 

677 

3732 

278 

678 

3733 

279 

679 

3734 

280 

680 

3735 

281 

681 

3736 

282 

682 

3737 

283 

683 

3738 

284 

684 

3739 

285 

685 

3740 

286 

686 

3741 

287 

687 

3742 

288 

688 

3743 

289 

:  689 

3744 

290 

690 

3745 

291 

691 

3748 

292 

692 

3747 

293 

693 

3748 

294 

694 

3749 

295 

695 

3750 

296 

696 

3751 

297 

697 

3752 

263 

663 

3753 

264 

664 

3754 

265 

665 

3755 

266 

666 

3756 

267 

667 

3757 

268 

668 

3758 

269 

669 

511  CROSS-REFERENCES. 


Bem.-Bal. 

Secretary  of  State. 

Mclntire. 

3759 

270 

670 

3760 

271 

671 

3761 

272 

672 

3762 

273 

673 

3763 

274 

674 

3764 

275 

675 

3765 

147 

547 

3766 

148 

548 

3766a 

149 

549 

4972 

107 

507 

4973 

108 

508 

4974 

95 

495 

4975 

96 

496 

4976 

97 

497 

7106 

142 

542 

7107 

143 

543 

7108 

144 

544 

7109 

145 

545 

7110 

125 

525 

7111 

126 

526 

7112 

127 

527 

7113 

128 

528 

7114 

129 

529 

7115 

130 

530 

7116 

131 

531 

7117 

132 

532 

7118 

133 

533 

7119 

134 

534 

7120 

135 

535 

7121 

136 

536 

7122 

137 

537 

7123 

138 

538 

7124 

139 

539 

7125 

140 

540 

7126 

141 

541 

7344 

81 

481 

7345 

82 

482 

7346 

83 

483 

7347 

34 

434 

EiaSTIJNG  CORPORATION  LAWS,  1913.  512 


Eem.-Bal. 

Secretary  of  State. 

Mclntire. 

7348 

22 

422 

7349 

23 

423 

7350 

423a 

8662 

98 

498 

8663 

105 

505 

8664 

106 

506 

8665 

99 

499 

8666 

100 

500 

8667 

102 

502 

8668 

101 

501 

8669 

103 

503 

8670 

104 

504 

8671 

504a 

8736 

76 

476 

8737 

77 

477 

8738 

477a 

8739 

74 

474 

8740 

75 

475 

87611/^' 

51 

451 

9080 

111 

511 

9081 

112 

512 

9082 

113 

513 

9083 

85 

485 

9300 

78 

478 

9300 

114 

514 

9301 

79 

479 

9301 

115 

515 

9302 

116 

516 

9303 

117 

517 

9304 

80 

480 

9305 

118 

518 

9314 

119 

519 

9315 

120 

520 

9316 

121 

521 

9317 

122 

522 

9318 

123 

523 

9319 

124 

524 

9504 

32 

432 

9505 

33 

433 

513  CROSS-REFERENCES. 


Kem.-Bal. 

Secretary  of  State. 

Mclntire. 

9506 

90 

490 

9507 

91 

491 

9508 

92 

492 

9509 

62 

462 

9510 

93 

493 

33 

§  752  EXISTING  CORPORATION  LAWS,  1913.  514 


FEDERAL  CORPORATION  TAX  LAW. 

§  752.     Special  Excise  Tax  on  Corporations. 

Act  Aug.  5,  1909,  c.  6,  §  38.     (H.  R.  1438.) 

Sec.  38.  That  every  corporation,  joint  stock  company  or 
association,  organized  for  profit  and  having  a  capital  stock 
represented  by  shares,  and  every  insurance  company,  now  or 
hereafter  organized  under  the  laws  of  the  United  States  or 
of  any  State  or  Territory  of  the  United  States  or  under  the 
Acts  of  Congress  applicable  to  Alaska  or  the  District  of 
Columbia,  or  now  or  hereafter  organized  under  the  laws  of 
any  foreign  country  and  engaged  in  business  in  any  State 
or  Territory  of  the  United  States  or  in  Alaska  or  in  the  Dis- 
trict of  Columbia,  shall  be  subject  to  pay  annually  a  special 
excise  tax  with  respect  to  the  carrying  on  or  doing  business 
by  such  corporation,  joint  stock  company  or  association,  or 
insurance  company,  equivalent  to  one  per  centum  upon  the 
entire  net  income  over  and  above  five  thousand  dollars  re- 
ceived by  it  from  all  sources  during  such  year,  exclusive  of 
amounts  received  by  it  as  dividends  upon  stock  of  other  cor- 
porations, joint  stock  companies  or  associations,  or  insur- 
ance companies,  subject  to  the  tax  hereby  imposed;  or  if 
organized  under  the  laws  of  any  foreign  country,  upon  the 
amount  of  net  income  over  and  above  five  thousand  dollars 
received  by  it  from  business  transacted  and  capital  invested 
within  the  United  States  and  its  Territories,  Alaska,  and  the 
District  of  Columbia  during  such  year,  exclusive  of  amounts 
so  received  by  it  as  dividends  upon  stock  of  other  corpora- 
tions, joint  stock  companies  or  associations,  or  insurance 
companies,  subject  to  the  tax  hereby  imposed:  Provided, 
however,  That  nothing  in  this  section  contained  shall  apply 
to  labor,  agricultural  or  horticultural  organizations,  or  to 
fraternal  beneficiary  societies,  orders  or  associations  operat- 
ing under  the  lodge  system,  and  providing  for  the  payment 
of  life,  sick,  accident,  and  other  benefits  to  the  members  of 
such  societies,   orders,   or  associations,   and   dependents   of 


515  FEDERAL  CORPORATION  TAX  LAW.  §  753 

such  members,  nor  to  domestic  building  and  loan  associa- 
tions, organized  and  operated  exclusively  for  the  mutual 
benefit  of  their  members,  nor  to  any  corporation  or  associa- 
tion organized  and  operated  exclusively  for  religious,  chari- 
table, or  educational  purposes,  no  part  of  the  net  income  of 
which  inures  to  the  benefit  of  any  private  stockholder  or  in- 
dividual. 

§  753.     Income  and  Tax,  How  Returned. 

Second.  Such  net  income  shall  be  ascertained  by  deduct- 
ing from  the  gross  amount  of  the  income  of  such  corporation, 
joint  stock  company  or  association,  or  insurance  company, 
received  within  the  year  from  all  sources,  (first)  all  the  ordi- 
nary and  necessary  expenses  actually  paid  within  the  year 
out  of  income  in  the  maintenance  and  operation  of  its  busi- 
ness and  properties,  including  all  charges  such  as  rentals  or 
franchise  payments,  required  to  be  made  as  a  condition  to 
the  continued  use  or  possession  of  property;  (second)  all 
losses  actually  sustained  within  the  year  and  not  compen- 
sated by  insurance  or  otherwise,  including  a  reasonable  al- 
lowance for  depreciation  of  property,  if  any,  and  in  the  case 
of  insurance  companies  the  sums  other  than  dividends,  paid 
within  the  year  on  policy  and  annuity  contracts  and  the  net 
addition,  if  any,  required  by  law  to  be  made  within  the  year 
to  reserve  funds;  (third)  interest  actually  paid  within  the 
year  on  its  bonded  or  other  indebtedness  to  an  amount  of 
such  bonded  and  other  indebtedness  not  exceeding  the  paid- 
up  capital  stock  of  such  corpor-^ition,  joint  stock  company 
or  association,  or  insurance  company,  outstanding  at  the 
close  of  the  year,  and  in  the  case  of  a  bank,  banking  asso- 
ciation or  trust  company,  all  interest  actually  paid  by  it 
within  the  year  on  deposits;  (fourth)  all  si^ms  paid  by  it 
within  the  year  for  taxes  imposed  under  the  authority  of  the 
United  States  or  of  any  State  or  Territory  thereof,  or  im- 
posed by  the  government  of  any  foreign  country  as  a  condi- 
tion to  carrying  on  business  therein;  (fifth)  all  amounts 
received  by  it  within  the  year  as  dividends  upon  stock  of 
other  corporations,  joint  stock  companies  or  associations,  or 


§  753  EXISTING  CORPORATION  LAWS,  1913.  516 

insurance  companies,  subject  to  the  tax  hereby  imposed: 
Provided,  That  in  the  case  of  a  corporation,  joint  stock  com- 
pany or  association,  or  insurance  company  organized  under 
the  laws  of  a  foreign  country,  such  net  income  shall  be  ascer- 
tained by  deducting  from  the  gross  amount  of  its  income 
received  within  the  year  from  business  transacted  and  capi- 
tal invested  within  the  United  States  and  any  of  its  Terri- 
tories, Alaska,  and  the  District  of  Columbia,  (first)  all  the 
ordinary  and  necessary  expenses  actually  paid  within  the 
year  out  of  earnings  in  the  maintenance  and  operation  of 
its  business  and  property  within  the  United  States  and  its 
Territories,  Alaska,  and  the  District  of  Columbia,  including 
all  charges  such  as  rentals  or  franchise  payments  required  to 
be  made  as  a  condition  to  the  continued  use  or  possession  of 
property;  (second)  all  losses  actually  sustained  within  the 
year  in  business  conducted  by  it  within  the  United  States  or 
its  Territories,  Alaska,  or  the  District  of  Columbia  not  com- 
pensated by  insurance  or  otherwise,  including  a  reasonable 
allowance  for  depreciation  of  property,  if  any,  and  in  the 
case  of  insurance  companies  the  sums  other  than  dividends, 
paid  within  the  year  on  policy  and  annuity  contracts  and 
the  net  addition,  if  any,  required  by  law  to  be  made  within 
the  year  to  reserve  funds:  (third)  interest  actually  paid 
vv^ithin  the  year  on  its  bonded  or  other  indebtedness  to  an 
amount  of  such  bonded  and  other  indebtedness,  not  exceed- 
ing the  proportion  of  its  paid-up  capital  stock  outstanding 
at  the  close  of  the  year  which  the  gross  amount  of  its  income 
for  the  year  from  business  transacted  and  capital  invested 
within  the  United  States  and  any  of  its  Territories,  Alaska, 
and  the  District  of  Columbia  bears  to  the  gross  amount  of  its 
income  derived  from  all  sources  within  and  without  the 
United  States;  (fourth)  the  sums  paid  by  it  within  the  year 
for  taxes  imposed  under  the  authority  of  the  United  States 
or  of  any  State  or  Territory  thereof;  (fifth)  all  amounts  re- 
ceived by  it  within  the  year  as  dividends  upon  stock  of  other 
corporations,  joint  stock  companies  or  associations,  and  in- 
surance companies,  subject  to  the  tax  hereby  imposed.  In 
the  case  of  assessment  insurance  companies  the  actual  de- 


517  FEDERAL  CORPORATION  TAX  LAW.  §  754 

posit  of  sums  with  State  or  Territorial  officers,  pursuant  to 
law,  as  additions  to  guaranty  or  reserved  funds  shall  be 
treated  as  being  payments  required  by  law  to  reserve  funds. 

§  754.    Deduction  from  Income. 

Third.  There  shall  be  deducted  from  the  amount  of  the 
net  income  of  each  of  such  corporations,  joint  stock  com- 
panies or  associations,  or  insurance  companies,  ascertained 
as  provided  in  the  foregoing  paragraphs  of  this  section,  the 
sum  of  five  thousand  dollars,  and  said  tax  shall  be  computed 
upon  the  remainder  of  said  net  income  of  such  corporation, 
joint  stock  company  or  association,  or  insurance  company, 
for  the  year  ending  December  thirty-first,  nineteen  hundred 
and  nine,  and  for  each  calendar  year  thereafter;  and  on  or 
before  the  first  day  of  March  nineteen  hundred  and  ten,  and 
the  first  day  of  March  in  each  year  thereafter,  a  true  and 
accurate  return  under  oath  or  affirmation  of  its  president, 
vice-president,  or  other  principal  officer,  and  its  treasurer 
or  assistant  treasurer,  shall  be  made  by  each  of  the  corpora- 
tions, joint  stock  companies  or  associations,  and  insurance 
companies,  subject  to  the  tax  imposed  by  this  section,  to  the 
collector  of  internal  revenue  for  the  district  in  which  such 
corporation,  joint  stock  company  or  association,  or  insurance 
company,  has  its  principal  place  of  business,  or,  in  the  case 
of  a  corporation,  joint  stock  company  or  association  or  in- 
surance company  organized  under  the  laws  of  a  foreign 
country,  in  the  place  where  its  principal  business  is  carried 
on  within  the  United  States,  in  such  form  as  the  Commis- 
sioner of  Internal  Revenue,  with  the  approval  of  the  Secre- 
tary of  the  Treasury,  shall  prescribe,  setting  forth,  (first) 
the  total  amount  of  the  paid-up  capital  stock  of  such  corpo- 
ration, joint  stock  company  or  association,  or  insurance  com- 
pany, outstanding  at  the  close  of  the  year;  (second)  the 
total  amount  of  the  bonded  and  other  indebtedness  of  such 
corporation,  joint  stock  company  or  association,  or  insurance 
company  at  the  close  of  the  year;  (third)  the  gross  amount 
of  the  income  of  such  corporation,  joint  stock  company  or 
association,  or  insurance  company,  received  during  such  year 


§  754  EXISTING  CORPORATION  LAWS,  1913.  518 

from  all  sources,  and  if  organized  under  the  laws  of  a  foreign 
country  the  gross  amount  of  its  income  received  within  the 
year  from  business  transacted  and  capital  invested  within 
the  United  States  and  any  of  its  Territories,  Alaska  and  the 
District  of  Columbia ;  also  the  amount  received  by  such  cor- 
poration, joint  stock  company  or  association,  or  insurance 
company,  within  the  year  by  way  of  dividends  upon  stock 
of  other  corporations,  joint  stock  companies  or  associations, 
or  insurance  companies,  subject  to  the  tax  imposed  by  this 
section;  (fourth)  the  total  amount  of  all  the  ordinary  and 
necessary  expenses  actually  paid  out  of  earnings  in  the  main- 
tenance and  operation  of  the  business  and  properties  of  such 
corporation,  joint  stock  company  or  association,  or  insur- 
ance company,  within  the  year,  stating  separately  all  charges 
such  as  rentals  or  franchise  payments  required  to  be  made 
as  a  condition  to  the  continued  use  or  possession  of  prop- 
erty, and  if  organized  under  the  laws  of  a  foreign  country 
the  amount  so  paid  in  the  maintenance  and  operation  of  its 
business  within  the  United  States  and  its  Territories,  Alaska, 
and  the  District  of  Columbia;  (fifth)  the  total  amount  of  all 
losses  actually  sustained  during  the  year  and  not  compen- 
sated by  insurance  or  otherwise,  stating  separately  any 
amounts  allowed  for  depreciation  of  property,  and  in  the 
case  of  insurance  companies  the  sums  other  than  dividends, 
paid  within  the  year  on  policy  and  annuity  contracts  and 
the  net  addition,  if  any,  required  by  law  to  be  made  within 
the  year  to  reserve  funds ;  and  in  the  case  of  a  corporation, 
joint  stock  company  or  association  or  insurance  company, 
organized  under  the  laws  of  a  foreign  country,  all  losses 
actually  sustained  by  it  during  the  year  in  business  con- 
ducted by  it  within  the  United  States  or  its  Territories, 
Alaska,  and  the  District  of  Columbia,  not  compensated  by 
insurance  or  otherwise,  stating  separately  any  amounts  al- 
lowed for  depreciation  of  property,  and  in  the  case  of  insur- 
ance companies  the  sums  other  than  dividends,  paid  within 
the  year  on  policy  and  annuity  contracts  and  the  net  addi- 
tion, if  any,  required  by  law  to  be  made  within  the  year  to 
reserve  fund;  (sixth)  the  amount  of  interest  actually  paid 


519  FEDERAL  CORPORATION  TAX  LAW.  §  755 

within  the  year  on  its  bonded  or  other  indebtedness  to  an 
amount  of  such  bonded  and  other  indebtedness  not  exceed- 
ing the  paid-up  capital  stock  of  such  corporation,  joint  stock 
company  or  association,  or  insurance  company,  outstanding 
at  the  close  of  the  year,  and  in  the  case  of  a  bank,  banking 
association  or  trust  company,  stating  separately  all  interest 
paid  by  it  within  the  year  on  deposits;  or  in  case  of  a  corpo- 
ration, joint  stock  company  or  association,  or  insurance  com- 
pany, organized  under  the  laws  of  a  foreign  country,  interest 
so  paid  on  its  bonded  or  other  indebtedness  to  an  amount 
of  such  bonded  and  other  indebtedness  not  exceeding  the 
proportion  of  its  paid-up  capital  stock  outstanding  at  the 
close  of  the  year,  which  the  gross  amount  of  its  income  for 
the  year  from  business  transacted  and  capital  invested 
within  the  United  States  and  any  of  its  Territories,  Alaska, 
and  the  District  of  Columbia,  bears  to  the  gross  amount  of 
its  income  derived  from  all  sources  within  and  without  the 
United  States;  (seventh)  the  amount  paid  by  it  v/ithin  the 
year  for  taxes  imposed  under  the  authority  of  the  United 
States  or  any  State  or  Territory  thereof,  and  separately  the 
amount  so  paid  by  it  for  taxes  imposed  by  the  government 
of  any  foreign  country  as  a  condition  to  carrying  on  busi- 
ness therein;  (eighth)  the  net  income  of  such  corporation, 
joint  stock  company  or  association,  or  insurance  company, 
after  making  the  deductions  in  this  section  authorized.  All 
such  returns  shall  as  received  be  transmitted  forthwith  by 
the  collector  to  the  Commissioner  of  Internal  Revenue. 

§  755.     False  Returns  and  Examinations. 

Fourth.  Whenever  evidence  shall  be  produced  before  the 
Commissioner  of  Internal  Revenue  which  in  the  opinion  of 
the  commissioner  justifies  the  belief  that  the  return  made  by 
any  corporation,  joint  stock  company  or  association,  or  in- 
surance company,  is  incorrect,  or  whenever  any  collector 
shall  report  to  the  Commissioner  of  Internal  Revenue  that 
any  corporation,  joint  stock  company  or  association,  or  in- 
surance company,  has  failed  to  make  a  return  as  required  by 
law,  the  Commissioner  of  Internal  Revenue  may  require  from 


§  756  EXISTING  CORPORATION  LAWS,  1913.  520 

the  corporation,  joint  stock  company  or  association,  or  in- 
surance company  making  such  return,  such  further  informa- 
tion with  reference  to  its  capital,  income,  losses,  and  ex- 
penditures as  he  may  deem  expedient ;  and  the  Commissioner 
of  Internal  Revenue,  for  the  purpose  of  ascertaining  the  cor- 
rectness of  such  return  or  for  the  purpose  of  making  a  return 
where  none  has  been  made,  is  hereby  authorized,  by  any 
regularly  appointed  revenue  agent  specially  designated  by 
him  for  that  purpose,  to  examine  any  books  and  papers  bear- 
ing upon  the  matters  required  to  be  included  in  the  return 
of  such  corporation,  joint  stock  company  or  association,  or 
insurance  company,  and  to  require  the  attendance  of  any 
officer  or  employee  of  such  corporation,  joint  stock  company 
or  association,  or  insurance  company,  and  to  take  his  testi- 
mony with  reference  to  the  matter  required  by  law  to  be 
included  in  such  return,  with  power  to  administer  oaths  to 
such  person  or  persons ;  and  the  Commissioner  of  Internal 
Revenue  may  also  invoke  the  aid  of  any  court  of  the  United 
States  having  jurisdiction  to  require  the  attendance  of  such 
officers  or  employees  and  the  production  of  such  books  and 
papers.  Upon  the  information  so  acquired  the  Commissioner 
of  Internal  Revenue  may  amend  any  returns  or  make  a  re- 
turn where  none  has  been  made.  All  proceedings  taken  by 
the  Commissioner  of  Internal  Revenue  under  the  provisions 
of  this  section  shall  be  subject  to  the  approval  of  the  Secre- 
tary of  the  Treasury. 

§  756.    Assessments. 

Fifth.  All  returns  shall  be  retained  by  the  Commissioner 
of  Internal  Revenue,  who  shall  make  assessments  thereon; 
and  in  the  case  of  any  return  made  with  false  or  fraudulent 
intent,  he  shall  add  one  hundred  per  centum  of  such  tax,  and 
in  case  of  a  refusal  or  neglect  to  make  a  return  or  to  verify 
the  same  as  aforesaid  he  shall  add  fifty  per  centum  of  such 
tax.  In  case  of  neglect  occasioned  by  the  sickness  or  ab- 
sence of  an  officer  of  such  corporation,  joint  stock  company 
or  association,  or  insurance  company,  required  to  make  said 
return,  or  for  other  sufficient  reason,  the  collector  may  allow 


521  FEDERAL  CORPORATION  TAX  LAW.  §  757 

such  further  time  for  making  and  delivering  such  return  as 
he  may  deem  necessary,  not  exceeding  thirty  days.  The 
amount  so  added  to  the  tax  shall  be  collected  at  the  same 
time  and  in  the  same  manner  as  the  tax  originally  assessed 
unless  the  refusal,  neglect,  or  falsity  is  discovered  after  the 
date  for  payment  of  said  taxes,  in  w^hich  case  the  amount 
so  added  shall  be  paid  by  the  delinquent  corporation,  joint 
stock  company  or  association,  or  insurance  company,  imme- 
diately upon  notice  given  by  the  collector.  All  assessments 
shall  be  made  and  the  several  corporations,  joint  stock  com- 
panies or  associations  or  insurance  companies,  shall  be  noti- 
fied of  the  amount  for  which  they  are  respectively  liable  on 
or  before  the  first  day  of  June  of  each  successive  year,  and 
said  assessment  shall  be  paid  on  or  before  the  thirtieth  day 
of  June,  except  in  cases  of  refusal  or  neglect  to  make  such 
returns,  and  in  cases  of  false  or  fraudulent  returns,  in  which 
cases  the  Commissioner  of  Internal  Revenue  shall,  upon  the 
discovery  thereof,  at  any  time  within  three  years  after  said 
return  is  due,  make  a  return  upon  information  obtained  as 
above  provided  for  and  the  assessment  made  by  the  Commis- 
sioner of  Internal  Revenue  thereon  shall  be  paid  by  such 
corporation,  joint  stock  company  or  association,  or  insurance 
company  immediately  upon  notification  of  the  amount  of 
such  assessment;  and  to  any  sum  or  sums  due  and  unpaid 
after  the  thirtieth  day  of  June  in  any  year,  and  for  ten  days 
after  notice  and  demand  thereof  by  the  collector,  there  shall 
be  added  the  sum  of  five  per  centum  on  the  amount  of  tax 
unpaid  and  interest  at  the  rate  of  one  per  centum  per  month 
upon  said  tax  from  the  time  the  same  becomes  due. 

§  757.     Filing  of  Assessment  Returns. 

Sixth.  When  the  assessment  shall  be  made,  as  provided 
in  this  section,  the  returns,  together  with  any  corrections 
thereof  which  may  have  been  made  by  the  commissioner, 
shall  be  filed  in  the  office  of  the  Commissioner  of  Internal 
Revenue  and  shall  constitute  public  records  and  be  open  to 
inspection  as  such. 


§§758,759     EXISTING  corporation  laws,  1913.  522 

§  758.     Information  not  to  be  Disclosed. 

Seventh.  It  shall  be  unlawful  for  any  collector,  deputy 
collector,  agent,  clerk,  or  other  officer  or  employee  of  the 
United  States  to  divulge  or  make  known  in  any  manner 
whatever  not  provided  by  law  to  any  person  any  informa- 
tion obtained  by  him  in  the  discharge  of  his  official  duty,  or 
to  divulge  or  make  known  in  any  manner  not  provided  by 
law  any  document  received,  evidence  taken,  or  report  made 
under  this  section  except  upon  the  special  direction  of  the 
President;  and  any  offense  against  the  foregoing  provision 
shall  be  a  misdemeanor  and  be  punished  by  a  fine  not  ex- 
ceeding one  thousand  dollars,  or  by  imprisonment  not  ex- 
ceeding one  year,  or  both,  at  the  discretion  of  the  court. 

§  759.     Penalty  for  False  Return  or  Refusal  to  Make. 

Eighth.  If  any  of  the  corporations,  joint  stock  companies 
or  associations,  or  insurance  companies,  aforesaid,  shall  re- 
fuse or  neglect  to  make  a  return  at  the  time  or  times  here- 
inbefore specified  in  each  year,  or  shall  render  a  false  or 
fraudulent  return,  such  corporation,  joint  stock  company  or 
association,  or  insurance  company,  shall  be  liable  to  a  pen- 
alty of  not  less  than  one  thousand  dollars  and  not  exceeding 
ten  thousand  dollars. 

Any  person  authorized  by  law  to  make,  render,  sign,  or 
verify  any  return,  who  makes  any  false  or  fraudulent  return, 
or  statement,  with  intent  to  defeat  or  evade  the  assessment 
required  by  this  section  to  be  made,  shall  be  guilty  of  a  mis- 
demeanor, and  shall  be  fined  not  exceeding  one  thousand 
dollars  or  be  imprisoned  not  exceeding  one  year,  or  both,  at 
the  discretion  of  the  court,  with  the  cost  of  prosecution. 

All  laws  relating  to  the  collection,  remission,  and  refund 
of  internal  revenue  taxes,  so  far  as  applicable  to  and  not 
inconsistent  with  the  provisions  of  this  section,  are  hereby 
extended  and  made  applicable  to  the  tax  imposed  by  this 
section. 

Jurisdiction  is  hereby  conferred  upon  the  circuit  and  dis- 
trict courts  of  the  United  States  for  the  district  within  which 
any  person  summoned  under  this  section  to  appear  to  testify 


523  FEDERAL  CORPORATION  TAX  LAW.  §  759 

or  to  produce  books,  as  aforesaid,  shall  reside,  to  compel  such 
attendance,  production  of  books,  and  testimony  by  appro- 
priate process. 

Note:  The  Federal  Corporation  Tax  Law  was  enacted  as  section  38 
of  the  Payne  Tariff  Act  of  1909.  This  act  applies  to  all  corporations 
not  specifically  exempted  and  has  been  construed  by  the  United  States 
supreme  court  in  Flint  v.  Stone  Tracy  Co.,  220  U.  S.  107,  to  be  con- 
stitutional and  not  to  be  a  franchise  or  income  tax,  but  an  excise  tax 
on  doing  "corporate  business." 

The  tax  is  imposed  on  all  corporations  and  joint  stock  companies 
and  associations  doing  business  in  a  corporate  or  quasi-corporate  capa- 
city under  statutory  authority.  (Eliot  v.  Freeman  et  al.,  220  U.  S. 
17S.) 

The  measure  of  the  tax  is  the  income  (subject  to  specified  deduc- 
tions) "from  all  sources,"  which  means  not  only  income  from  the 
property  used  in  business  but  income  from  every  source.  (Flint  v. 
Stone  Tracy  Co.,  220  U.  S.  107.) 

Beceivers  of  insolvent  corporations  should  make  the  required  return 
whether  there  be  liability  to  pay  the  tax  or  not.  (Pennsylvania  etc. 
Co.  V.  New  York  City  R.  Co.,  176  Fed.  471.) 

The  Interstate  Commerce  Act  of  1887  as  amended.  United  States 
Compiled  Statutes  1901,  vol.  3,  p.  3154,  and  as  amended  by  the  Act 
of  1906-10,  U.  S.  Compiled  Statutes,  Supplement  of  1911,  p.  1284,  and 
The  Sherman  Anti-Trust  Act,  so  called,  entitled  "Monopolies  and 
Combinations  in  Restraint  of  Trade,"  as  passed  in  1890  and  amended 
in  1894,  U.  S.  Compiled  Statutes  1901,  vol.  3,  p.  3200,  and  as  amended 
in  1903,  U.  S.  Compiled  Statutes,  Supplement  1911,  p.  1318,  and  in 
1910,  U.  S.  Compiled  Statutes,  Supplement  1911,  p.  1382,  should  be 
consulted  by  corporations  doing  interstate  business. 


OUTLINE 


OF 


COEPORATE  PEOCEDUEE. 


§  760.     Character  of  Corporate  Existence. 

A  corporation  is  a  union  of  individuals  acting  under  a  cor- 
porate name  as  a  unit,  authorized  and  recognized  as  such  by- 
statute  law.  It  is  devised  and  created  by  the  law  not  for  its 
own  sake  or  benefit,  but  purely  to  facilitate  action  on  the 
part  of  individuals  composing  its  membership.  The  statute 
brings  it  into  being,  regulates  its  conduct  and  terminates  its 
existence.  The  formation  and  conduct  of  corporations  is 
therefore  almost  invariably  a  matter  of  compliance  with  statu- 
tory requirements  governing  the  case  in  hand,  and  statutory 
provisions,  though  many  times  inconsistent  and  incomplete, 
often  uncertain  and  ambiguous,  and  sometimes  unreasonable, 
can  only  be  modified  or  improved  by  the  legislature  or  other 
law-making  power.  In  the  concrete  case  the  statute  must  be 
taken  as  it  is  and  complied  with  in  its  express  terms,  so  far 
as  possible.  One  should  not  do  more  and  must  not  do  less 
than  the  statute  requires.  In  the  case  of  the  corporation, 
strict  compliance  with  the  statute  is  of  imperative  importance, 
and  failure  therein  often  leads  to  endless  confusion,  loss,  and 
perhaps  financial  ruin  of  individuals  concerned.  In  the 
preparation,  therefore,  of  papers  and  documents  for  use  in 
the  formation  and  conduct  of  corporations,  the  aim  must  be 
persistent  toward  the  utmost  simplicity,  clearness  and  precise 
compliance  with  the  statutory  requirements  possible  to  attain. 

§  761.    The  Several  Kinds  of  Corporations. 

Of  private  corporations,  or  those  composed  of  persons  ex- 
pressly assenting  to  membership  therein,  the  statutory  Cor- 
poration Laws  of  Washington  provide  by  sections  401  and  402 
thereof  for  the  formation  of  all  kinds  of  trading  and  business 

(525) 


§  762  CORPORATE  PROCEDURE.  526 

stock  corporations  for  profit,  including  railroads,  but  not  in- 
cluding those  otherwise  expressly  provided  for,  to  wit :  Build- 
ing and  loan  associations,  by  section  550;  trust  companies,  by 
section  588 ;  banks,  by  section  612 ;  patrons  of  husbandry 
(Granges),  by  section  547;  co-operative  associations,  by  sec- 
tion 546. 

Private  corporations  not  for  profit  are  authorized  to  be 
formed  as  follows :  Membership,  or  nonstock,  corporations  of 
all  kinds  not  otherwise  expressly  provided  for,  by  sections 
663—667.  Those  otherwise  provided  for  are  religious,  educa- 
tional and  charitable,  for  a  college,  seminary,  church,  library, 
benevolent,  temperance,  charitable  or  scientific  society,  by  sec- 
tion 677 ;  secret  societies,  lodges,  orders,  by  section  679 ;  social 
clubs  and  any  educational,  charitable  or  religious  purpose,  by 
sections  686,  687 ;  cemetery  associations,  by  section  706. 

§  762.     Preliminary  Considerations. 

Preliminary  to  taking  the  first  steps  for  the  formation  of 
a  company  and  the  preparation  of  the  articles  of  incorpora- 
tion, the  following  rules  and  requirements  are  to  be  considered 
and  borne  in  mind : 

Corporations  may  subscribe  for,  hold,  own  and  vote  stock 
in  other  corporations.     (Section  408.) 

Corporate  names  are  not  to  be  duplicated  (section  437)  ; 
therefore,  it  should  be  ascertained  from  the  Secretary  of  State, 
as  early  as  conveniently  may  be,  whether  a  desired  name  may 
be  used. 

The  whole  capital  stock  of  the  company  must  be  subscribed 
before  it  begins  business,  unless  its  business  is  to  be  confined 
to  loaning  money  on  real  estate.     (Section  401.) 

Subscriptions  to  stock  may  be  paid  in  cash  or  property,  as 
provided  by  the  stockholders  or  trustees  in  absence  of  fraud. 
(Section  414.) 

Preferred  stock  is  not  specifically  provided  for  by  statute, 
but  may  be  authorized  at  the  outset  by  the  by-laws  or  other- 
wise by  the  trustees ;  i.  e.,  before  any  subscriptions  to  the 
common  stock  are  taken  without  notice  to  such  subscriber. 
(Sections  407,  417.) 


527  OUTLINE  OF  CORPORATE  PROCEDURE.  §  763 

The  liability  of  stockholders  is  by  the  Constitution  limited 
to  unpaid  subscriptions.      (Const.,  sec.  734.) 

The  capital  stock  of  the  company  may  be  increased  or  de- 
creased at  any  time  by  complying  with  sections  424,  425,  426. 

The  trustees  must  be  stockholders  (section  407)  and  the  trus- 
tees for  the  first  six  months  or  less  are  named  in  the  articles. 
(Section  402.)  They  must  take  an  oath  before  entering  on 
their  duties.     (Section  407.) 

Meetings  of  stockholders  must  be  held  at  the  principal  place 
of  business  in  the  state.     (Section  411.) 

Meetings  of  trustees  are  to  be  held  at  such  places  within  or 
without  the  state  as  may  be  designated  by  the  articles  or  by- 
laws.     (Section  411.) 

Stockholders  may  expel  trustees  and  elect  others  in  their 
place;  otherwise  vacancies  are  filled  by  the  board.  (Section 
407.) 

By-laws  are  adopted  and  amended  by  the  trustees.  (Sec- 
tions, 406,  407.) 

Annual  reports  are  not  required  of  business  corporations. 

Every  stock  corporation,  domestic  or  foreign,  must  pay  an 
annual  license  fee  of  $15  (section  719),  and  cannot  maintain 
suit  unless  the  license  fee  is  paid.     (Section  720.) 

Fees  are  as  follows:  For  filing  articles,  $25  (section  714)  ; 
for  amendatory  or  supplemental  articles,  certificates  of  in- 
crease or  decrease  of  capital  stock,  $10  (section  715)  ;  for  ap- 
pointment or  revocation  of  appointment  of  agent  by  foreign 
corporation,  $5  (section  716)  ;  certified  copies,  $5  (section 
717)  ;  recording  fees  (section  718). 

§  763.    Articles  of  Incorporation. 

All  stock  corporations  for  profit,  trade  or  business  other 
than  those  having  for  some  or  all  of  their  objects  banking, 
insurance,  trust  company  business,  or  the  rights  and  powers 
of  building  and  loan  associations  are  formed  under  sections 
401  and  402,  corporation  laws. 

Articles  must  be  made  and  executed  in  compliance  with  the 
requirements  of  those  sections  in  triplicate,  one  to  be  filed  in 
the  office  of  the  Secretary  of  State,  one  in  the  office  of  the 
county  auditor,  and  one  in  the  company's  files.    (Section  402.) 


§  764  CORPORATE  PROCEDURE.  528 

In  view  of  the  fact  that  stock  corporations  for  profit  formed 
under  sections  401  and  402  are  by  section  406,  subdivision  7, 
confined  in  their  exercise  of  corporate  powers  within  the  ob- 
jects and  purposes  of  the  company  expressed  in  their  articles 
of  incorporation,  it  is  important  in  stating  the  objects  and  pur- 
poses in  the  articles  to  describe  the  business  to  be  conducted 
by  apt  and  specific  wording  covering  all  emergencies  that  may 
arise  during  the  corporate  existence.  A  form  for  a  building 
company  complete  with  names  and  data  and  executed  as  if 
ready  for  filing  will  be  found  post  (section  797),  and  sub- 
joined thereto  are  purpose  clauses  for  various  kinds  of  business 
corporations. 

As  soon  as  may  be  after  the  corporate  name,  the  amount 
of  the  capital  stock,  the  par  value  of  the  shares  and  the  prefer- 
ences, if  any,  i.  e.,  whether  the  stock  is  to  be  all  common  or 
part  preferred,  have  been  determined  upon  by  the  parties  in 
interest  as  later  to  be  adopted  by  the  by-laws,  the  corporate 
seal,  stock  certificate  book,  and  stock  transfer  or  record  book, 
should  be  ordered  from  the  stationers,  in  order  that  they 
may  be  ready  when  required  for  the  first  meeting  of  trustees. 

§  764.    First  Meeting  of  Trustees. 

As  soon  as  conveniently  may  be  after  the  articles  have  been 
made,  executed  and  filed,  and  before  the  trustees  named  in  the 
certificate  do  any  corporate  act,  they  should  take  and  sub- 
scribe to  an  oath  as  required  by  section  407.  A  form  of  oath 
will  be  found  in  section  800. 

Thereafter  one  of  the  trustees  should  deliver,  personally, 
to  each  of  the  other  trustees  a  notice  in  writing  of  such  first 
meeting  setting  forth  the  time  and  place  in  compliance  with 
section  412.  If  for  any  reason  it  is  impossible  to  deliver  the 
notice  to  any  of  the  trustees,  it  may  be  published  as  provided 
in  that  section.  A  form  of  written  notice  for  the  purpose 
will  be  found  in  section  799.  At  the  time  and  place  set  in  the 
notice  the  first  meeting  of  the  trustees  named  in  the  certificate 
should  be  held  and  the  organization  of  the  company  completed, 
officers  elected,  stock  certificates,  by-laws  and  corporate  seal 
formally  adopted,  and  before  any  corporate  business  is  com- 
menced subscriptions  to  the  entire   capital  stock  should  be 


529  OUTLINE  OF  CORPORATE  PROCEDURE.    §§  765,  766 

received.  A  form  of  minutes  for  the  first  meeting  of  the  trus- 
tees will  be  found  in  section  798.  While  it  is  unnecessary  to 
follow  any  particular  form  of  procedure  or  minutes,  it  is 
important  to  spread  in  some  shape  on  minutes  or  records  of 
the  company  proof  of  compliance  with  statutory  requirements. 

§  765.     Subscriptions. 

Subscriptions  are  contracts  binding  on  each  subscriber  until 
the  par  value  of  stock  subscribed  by  him  is  fully  paid  in  cash 
or  property.  In  case,  however,  that  stock  is  issued  before  it 
is  fully  paid  and  afterward  transferred  on  the  books  of  the 
company,  the  transferee  becomes  liable  instead  of  the  orig- 
inal subscriber  for  the  amounts  still  due  and  unpaid  on  the 
stock.  No  particular  form  of  subscription  agreement  must 
necessarily  be  followed,  it  being  enough  if  the  subscriber  ex- 
pressly agrees  to  take  certain  shares  of  stock.  A  form  of  stock 
subscription  should  be  used,  however,  clearly  defining  the 
rights  and  liabilities  of  the  subscriber  to  avoid  question  and 
possible  litigation.     Such  a  form  will  be  found  in  section  803. 

§  766.     Preferred  Stock. 

Preferred  stock  is  stock  entitled  to  preference  over  common 
stock  in  the  payment  of  any  dividends  declared  and  in  the 
distribution  of  assets  on  dissolution.  Preferred  stock,  for  the 
reason  that  it  is  preferred  over  common  stock,  must  be  issued, 
if  at  all,  with  the  assent,  express  or  implied,  of  every  sub- 
scriber to  the  common  stock.  Preferred  stock,  if  issued, 
should  therefore  be  authorized  at  the  outset  and  brought  to  the 
actual  notice  of  every  subscriber  to  the  common  stock.  There 
are  various  kinds  of  preferred  stock,  the  particular  prefer- 
ence adopted  in  the  concrete  case  being  a  matter  of  business 
advisability  under  the  circumstances.  The  kind  or  form  of 
preference  having  been  selected,  it  should  be  adopted  by  the 
trustees  and  set  out  in  the  by-laws,  and  the  preferential  right 
should  be  set  forth  in  a  manner  sufficient  to  give  notice  of 
its  existence  in  the  stock  certificates  and  subscription  agree- 
ments. A  form  for  cumulative  preferred  stock  preference 
34 


§§767,768  CORPORATE   PROCEDURE.  530 

in  the  by-laws  will  be  found  in  section  801,  article  VIII,  and 
a  corresponding  form  of  stock  certificate  in  section  802. 

§  767.     By-laws. 

By-laws  are  authorized  to  be  made  by  the  statutory  grant 
of  powers  to  the  corporation  (section  406,  subdivision  6),  and 
since  the  powers  of  the  corporation  are  to  be  exercised  by  the 
trustees  (section  407),  the  power  to  make  by-laws  is  conse- 
quently in  the  trustees. 

By-laws  as  rules  adopted  to  govern  the  procedure  of  as- 
semblies of  individuals  are  of  very  ancient  origin.  In  cor- 
porations, they  govern  the  manner  of  the  exercise  of  the 
corporate  powers  and  the  respective  rights,  duties  and  liabili- 
ties of  the  stockholders,  trustees  and  officers  of  the  corpora- 
tion. Once  adopted  they  have  the  force  of  law,  binding  on  all 
persons  having  actual  or  constructive  notice  of  them,  and  can- 
not be  modified  or  repealed  except  in  accordance  with  statu- 
tory provision  or  the  rule  prescribed  in  themselves  for  their 
amendment,  alteration  or  repeal.  It  is  therefore  important, 
in  order  to  make  the  by-laws  adopted  in  any  particular  ease 
elastic  and  easily  modified  or,  on  the  other  hand,  to  make 
them  rigid  and  inelastic,  if  so  desired,  to  include  or  exclude 
a  provision  for  their  amendment  or  repeal.  "Where  it  is  con- 
sidered desirable,  as  is  usually  the  case,  to  make  the  by-laws 
readily  adaptable  to  changing  circumstances,  the  provision  for 
amendment,  alteration  or  repeal  is  included,  thus  taking  the 
by-laws  out  of  the  category  of  rigid  contractual  rules  and 
enabling  the  trustees  at  any  meeting  to  alter,  amend  or  re- 
peal them.  A  workable  form  of  by-laws  devised  by  experi- 
ence to  prevent  deadlocks  and  to  facilitate  corporate  action 
will  be  found  as  adopted  in  the  form  of  minutes  for  the  first 
meeting  of  trustees  in  section  801.  This  form  of  by-laws 
should,  of  course,  be  modified  or  abridged  where  necessary  or 
desirable,  to  meet  the  requirements  of  a  particular  case. 

§  768.    Issue  of  Stock  for  Property. 

Since  by  section  414  the  times,  manner  and  amounts  of  pay- 
ments of  subscriptions  to  stock  are  to  be  determined  by  the 
stockholders  or  trustees,  property  may  be  accepted  in  payment 


531  OUTLINE  OF  CORPORATE  PROCEDURE.  §  769 

of  subscriptions  and  stock  issued  therefor  fully  paid  in  the 
absence  of  fraud. 

While  the  issue  of  stock  fully  paid  for  property  is  notori- 
ously often  utilized  for  the  purpose  of  evading  the  statutory 
liability  of  stockholders  for  unpaid  subscriptions  and  in  cover- 
ing watered  stock  issues,  it  is  none  the  less  frequently  made 
use  of  for  the  legitimate  purpose  contemplated  by  the  statute, 
namely,  to  enable  persons  incorporating  their  business  or  other 
concerns  to  turn  over  their  property  to  the  corporation  and 
to  take  stock  therefor  fully  paid  to  the  amount  of  the  fair 
valuation  of  the  property.  If,  whatever  the  pretense,  the 
property  turned  over  to  the  corporation  for  stock  is  in  fact 
intentionally  and  excessively  overvalued,  no  device,  however 
clever,  can  alter  the  actual  fact  or  do  more  than  cover  the 
attempted  evasion  of  the  statute.  The  value  of  property,  how- 
ever, is  in  any  event  a  matter  of  opinion  purely,  and  what- 
ever the  difference  of  opinion  and  however  great  may  be  the 
fluctuation  from  time  to  time  in  the  valuation  placed  by  dif- 
ferent persons  upon  the  property,  if,  nevertheless,  at  the  time 
stock  is  issued  for  property  the  valuation  placed  upon  the 
property  can  be  shown  for  reasons  stated  to  be  a  fair  one  and 
fairly  made,  and  especially  if  made  by  persons  not  directly 
interested  in  putting  an  overvaluation  on  the  property,  stock 
issued  for  property  thus  valued  will  stand  as  fully  paid,  and 
its  issue  as  fully  paid  stock  will  not  be  successfully  ques- 
tioned. 

Where  stock  is  issued  for  property,  therefore  not  only 
should  the  property  be  fairly  valued,  but  the  minutes  and 
records  of  the  company  should  show  that  to  be  the  case,  and 
care  especially  should  be  taken  that  none  of  the  trustees,  whose 
function  it  may  be  to  pass  on  the  valuation  of  the  property, 
is  an  owner  of  or  otherwise  directly  interested  in  the  property 
valued.  Procedure  in  such  cases  is  indicated  in  the  form  for 
minutes  of  first  meeting  of  trustees  in  sections  798  and  805. 

§  769.    List  of  Officers. 

After  the  first  meeting  of  trustees  and  the  election  of  offi- 
cers, and  within  thirty  days  after  the  filing  of  the  articles, 


§§  770-772         CORPORATE  PROCEDURE.  532 

the  company  must  make  and  file  with  the  county  auditor,  in 
compliance  with  section  404,  a  list  of  officers,  with  their  titles, 
names,  addresses  and  terms  of  office.  A  form  will  be  found 
in  section  806. 

§  770.    Meetings  of  Trustees. 

The  trustees  may  and  should  meet  from  time  to  time  as 
designated  in  the  by-laws  and  otherwise,  and  exercise  the  cor- 
porate powsrs  of  the  company  as  authorized  by  sections  406  and 
407  and  by  the  articles  and  in  the  manner  provided  by  the  by- 
laws. 

In  case  a  trustee  is  unable  to  attend  any  meeting,  proof 
that  notice  of  the  meeting  was  duly  given  him  or  that  he 
waived  the  same  should  be  filed  with  the  records  of  the  com- 
pany and  spread  on  the  minutes  of  such  meeting.  For  form 
of  notice  and  waiver,  see  sections  799  and  819. 

§  771.     Records  and  Papers. 

It  is  th«  duty  of  trustees,  in  compliance  with  section  420, 
to  keep  a  record  book  of  stockholders,  alphabetically  arranged, 
showing  the  names  of  stockholders,  the  number  of  shares 
owned,  and  the  times  of  transfer,  to  keep  the  record  open  for 
inspection  by  stockholders  and  creditors,  to  allow  extracts 
to  be  made,  and  to  furnish  certified  copies  of  corporate  papers 
on  file. 

§  772.  Assessments  on  Stock  Subscriptions  and  Sale  of 
Shares. 
So  long  as  any  part  of  the  stock  subscriptions  remains  un- 
paid, the  trustees  may,  under  section  414  and  in  compliance 
with  the  by-laws,  make  assessments  calling  for  all  or  part  of 
the  balance  due  by  giving  notice  of  such  assessment  to  the 
stockholders  personally,  or  by  publication  of  the  notice  for 
four  weeks  in  a  newspaper  published  in  the  county  of  the 
principal  place  of  business  of  the  company,  and  in  default  of 
payment  by  the  stockholder  his  shares  may  be  sold  at  public 
auction,  in  compliance  with  the  section.  A  form  of  notice  of 
assessment  for  personal  service  or  publication  will  be  found 
in  section  821. 


533  OUTLINE  OF  CORPORATE  PROCEDURE.         §§  773-775 

§  773.     Change  of  Name. 

If  at  any  time  it  be  found  advisable  to  change  the  corporate 
name  of  the  company,  the  trustees  may  by  resolution  author- 
ize supplemental  articles  of  incorporation  to  be  filed  for  that 
purpose,  in  compliance  with  section  430,  and  upon  executing 
such  articles  and  filing  the  same  in  the  office  of  the  Secretary 
of  State  and  in  the  office  of  the  county  auditor  with  the  notice 
of  such  change  as  required  by  section  430,  the  corporate  name 
will  be  changed  accordingly.  For  form  of  supplemental 
articles  and  notice,  see  sections  807,  808. 

§  774.     Change  or  Removal  of  Place  of  Business. 

If  it  is  desired  to  move  the  principal  place  of  business  of 
the  company  from  one  place  to  another  in  the  same  county, 
the  removal  should  be  authorized  by  a  resolution  of  the  trus- 
tees, and  a  removal  notice  published  four  weeks  in  a  news- 
paper published  nearest  the  old  place  of  business,  in  com- 
pliance with  section  429.  If  the  principal  place  of  business 
is  to  be  moved  into  another  county  in  the  state,  in  addition 
to  the  resolution  of  the  trustees  and  the  publication  of  notice, 
a  certified  copy  of  the  certificate  of  incorporation  must  be  filed 
in  the  office  of  the  county  auditor  of  the  county  in  which  the 
principal  place  of  business  is  to  be  in  the  future.  For  form  of 
notice,  see  section  820. 

§  775.    Stockholders'  Meetings. 

Annual  and  special  meetings  of  the  stockholders  are  held 
at  the  principal  place  of  business  of  the  company  (section  411) , 
upon  such  notice  as  shall  be  directed  by  the  by-laws  of  the 
company  (section  407)  ;  the  annual  meeting  is  held  at  the  time 
designated  in  the  by-laws  for  the  election  of  trustees,  and  at 
both  annual  and  special  meetings  each  stockholder  is  entitled 
to  cast  as  many  votes  in  person  or  by  proxy  as  there  are 
shares  of  stock  standing  in  his  name  on  the  books  of  the  com- 
pany, unless  otherwise  provided  by  the  by-laws.  Notice  of  the 
annual  meeting  is  given  as  required  by  the  by-laws  of  the  com- 
pany.    See  form  in  section  817. 

Notice  of  special  meeting-s  is  given  as  required  by  the 
by-laws,   and   any   statutory   requirement   applicable   to   the 


§§  776,  777         CORPORATE  PROCEDURE.  534 

particular  case.     For  form  of  notice  for  special  meeting  of 
stockholders,  see  section  809. 

§  776.     Increase  or  Decrease  of  Capital  Stock. 

Whenever  a  corporation  desires  to  increase  or  decrease  its 
capital  stock. to  an  amount  not  less  than  its  debts  and  liabili- 
ties, it  may  do  so  by  a  vote  of  two-thirds  of  its  shares  of  stock 
taken  at  a  special  meeting  called  by  a  notice  published  for 
eight  weeks  in  a  newspaper  of  the  county,  and  by  filing  in  the 
office  of  the  Secretary  of  State  and  in  the  office  of  the  county 
auditor  a  certificate  executed  and  verified  by  the  chairman  and 
secretary  of  the  meeting  and  certified  to  by  a  majority  of  the 
trustees  showing  a  compliance  with  the  statutory  provisions 
(sections  424,  425,  426). 

A  form  of  such  certificate,  including  the  notice  of  meeting, 
will  be  found  in  section  809. 

§  777.    Dissolution. 

Corporations  are  terminated  in  one  of  three  ways :  by  the 
expiration  of  the  term  of  existence  stated  in  the  charter,  by 
forfeiture  of  the  charter,  and  by  voluntary  dissolution. 

In  the  case,  however,  of  corporations  failing  to  pay  their 
license  fee,  provision  is  made  by  statute  (sections  720,  724) 
for  the  involuntary  dissolution  of  such  corporations  by  the 
Secretary  of  State.  In  case  a  corporation  desires  volun- 
tarily to  dissolve  itself,  it  may,  with  the  consent  of  two-thirds 
of  the  stockholders  given  by  vote  at  a  special  meeting  called 
for  the  purpose,  present  a  petition  to  that  effect  to  the  su- 
perior judge  of  the  county  in  which  it  has  its  office,  and  on 
compliance  in  that  and  other  respects  with  section  428  it  may 
be  dissolved,  in  which  case  the  trustees  at  the  time  continue 
as  trustees  for  the  stockholders  and  creditors  (section  427)  to 
collect  and  pay  outstanding  debts,  settle  all  its  affairs,  and 
divide  among  the  stockholders  the  remaining  money  and  prop- 
erty. A  form  of  petition  and  certificate  for  voluntary  dis- 
solution in  compliance  with  section  428  will  be  found  in  section 
822. 


535  OUTLINE  OF  CORPORATE  PROCEDURE.  §  778 

§  778.     Foreign  Corporations. 

A  foreign  corporation  in  Washington  is  one  organized 
under  the  laws  of  some  jurisdiction  other  than  the  state  of 
Washington.  Foreign  corporations  on  complying  with  the 
statute  may  do  business,  sue  and  be  sued  to  the  same  extent 
as  domestic  corporations  (section  452).  A  corporation,  the 
majority  of  whose  capital  stock  is  owned  by  aliens,  may  not 
acquire  ownership  of  lands  other  than  mineral  lands  (section 
452).  A  foreign  corporation  cannot  conduct  a  real  estate 
brokerage  business  in  the  state  (section  452). 

To  comply  with  the  statute,  a  foreign  corporation  must  file 
in  the  office  of  the  Secretary  of  State  a  certified  copy  of  its 
certificate  of  incorporation  (section  453),  also  written  appoint- 
ment  of  agent  (section  454),  and  must  pay  an  annual  license 
fee  (section  719).  A  form  for  written  appointment  of  agent 
will  be  found  in  section  811. 


§§  779,  780         CORPORATE  PROCEDURE.  536 


VARIOUS  PURPOSE  CLAUSES. 

§  779.    Advertising. 

To  prepare  and  arrange  advertisements ;  to  make,  build, 
manufacture  and  construct  advertising  devices  and  novelties ; 
to  erect,  construct,  purchase,  lease,  hold,  sell  or  otherwise 
acquire  and  dispose  of  fences,  billboards,  signboards,  build- 
ings, papers,  publications  and  other  structures  and  spaces 
suitable  or  desired  for  advertising  purposes;  to  conduct  a 
general  advertising  business  as  principals  and  agents ;  to  carry- 
on  the  business  of  printers,  publishers,  painters  and  deco- 
rators; to  acquire,  hold  and  dispose  of  inventions,  patents  and 
trademarks  in  the  United  States  or  foreign  countries;  to  ac- 
quire, hold  and  dispose  of  real  and  personal  property ;  to  carry- 
on  said  business  as  principal  or  agent  "within  and  without  the 
state  of  Washington,  and  to  carry  on  any  business,  make  con- 
tracts and  do  any  and  all  acts  necessary,  proper,  incidental  or 
convenient  to  said  purposes  and  objects  not  inconsistent  with 
the  laws  of  "Washington. 

§  780.    Automobiles  and  Vehicles. 

To  make,  manufacture  and  sell  any  and  all  kinds  of  motors, 
engines,  machines,  machinery  and  contrivances  for  the  gener- 
ation of  steam,  electricity,  gasoline  or  other  forms  of  power 
now  known  or  which  may  be  hereafter  discovered;  to  make, 
manufacture  and  sell  cars,  carriages,  wagons,  boats,  aero- 
planes, balloons  and  vehicles  of  every  kind  and  description 
for  the  transportation  of  passengers  and  goods  by  land,  water 
or  through  the  air;  to  manufacture,  acquire,  hold,  sell  and 
otherwise  dispose  of  machinery,  machine  supplies  and  en- 
gineering appliances  of  all  kinds ;  to  acquire,  hold  and  dispose 
of  inventions,  patents  and  trademarks  in  the  United  States 
and  foreign  countries;  to  acquire,  hold  and  dispose  of  any 
and  all  kinds  of  real  and  personal  property;  to  conduct  said 
business  as  principal  or  agent  wdthin  and  without  the  state 
of  Washington,  and  to  carry  on  any  business,  make  contracts 
and  do  any  and  all  acts  necessary,  proper,  incidental  or  con- 


537  VARIOUS  PURPOSE  CLAUSES,  §§  781-783 

venient  to  said  purposes  and  objects  not  inconsistent  with  the 
laws  of  Washington. 

§  781.    Brewery. 

To  grow,  cure,  mamifacture,  prepare  or  otherwise  acquire, 
hold,  sell,  or  otherwise  dispose  of  malt  and  hops ;  to  manufac- 
ture, brew  and  bottle  all  kinds  of  ale,  beer,  porter  and  other 
beverages,  and  in  general  to  manufacture,  purchase,  sell  and 
deal  in  malt  and  hops  and  the  products  thereof;  to  acquire, 
hold  and  dispose  of  inventions,  patents  and  trademarks  in  the 
United  States  or  foreign  countries;  to  acquire,  hold  and  dis- 
pose of  any  and  all  kinds  of  real  and  personal  property;  to 
conduct  said  business  as  principal  or  agent  within  and  with- 
out the  state  of  Washington,  and  to  carry  on  any  business, 
make  contracts,  and  do  any  and  all  acts  necessary,  proper,  in- 
cidental or  convenient  to  said  purposes  and  objects  not  in- 
consistent with  the  laws  of  Washington. 

§  782.     Bricks. 

To  make,  manufacture,  purchase,  or  otherwise  acquire,  hold 
and  sell  bricks,  tiles,  pipes,  pottery,  earthenware,  china,  terra- 
cotta and  ceramic  ware,  and  to  buy,  sell,  deal  and  trade  in 
every  kind  of  bricks,  stone  and  building  materials,  goods  and 
merchandise  by  land  and  water ;  to  acquire,  hold  and  dispose 
of  quarries,  clay,  sand  and  gravel  banks  and  deposits,  cars, 
boats  and  vehicles  of  all  kinds;  to  acquire,  hold  and  dispose 
of  inventions,  patents  and  trademarks  in  the  United  States 
and  foreign  countries ;  to  acquire,  hold  and  dispose  of  real 
and  personal  property  of  all  kinds;  to  conduct  said  business  as 
principal  or  agent  within  and  without  the  state  of  Washing- 
ton, and  to  carry  on  any  business,  make  contracts  and  do  any 
and  all  acts  necessary,  proper,  incidental  or  convenient  to  said 
purposes  and  objects  not  inconsistent  with  the  laws  of  Wash- 
ington. 

§  783.    Cattle. 

To  rear,  grow,  breed,  buy  or  otherwise  acquire,  hold,  sell  or 
otherwise  dispose  of  any  and  all  kinds  of  cattle  and  livestock, 
meats,  goods,  wares  and  merchandise  pertaining  and  belong- 


§§784,785  CORPORATE   PROCEDURE.  538 

ing  to  the  cattle,  livestock,  meat  and  butcher  business;  to 
build  or  otherwise  acquire,  hold,  maintain,  sell  or  otherwise 
dispose  of  abattoirs  for  the  slaughter  and  killing  of  all  kinds 
of  animals  and  cattle ;  to  cure,  can,  preserve,  manufacture  and 
otherwise  prepare  all  kinds  of  provisions,  articles  and  mer- 
chandise for  food  or  other  use  made  of  meats  and  fat  and  any 
and  all  kinds  of  goods  kindred  to  the  meat  and  butcher  busi- 
ness, and  to  prepare  in  any  and  every  manner  the  carcasses 
of  animals  and  cattle  into  merchandise  for  the  butcher  and 
meat  business ;  to  acquire,  hold  and  dispose  of  inventions, 
patents  and  trademarks  in  the  United  States  or  foreign 
countries;  to  acquire,  hold  and  dispose  of  any  and  all  kinds 
of  real  and  personal  property ;  to  conduct  said  business  as 
principal  or  agent  within  and  without  the  state  of  Washing- 
ton, and  to  carry  on  any  business,  make  contracts  and  do  any 
and  all  acts  necessary,  proper,  incidental  or  convenient  to  said 
purposes  and  objects  not  inconsistent  with  the  laws  of  Wash- 
ington. 

§  784.     Commission  Merchants. 

To  manufacture,  produce,  purchase  or  otherwise  acquire, 
own,  hold,  sell  or  otherwise  dispose,  as  principal  or  as  agent, 
upon  commission  or  otherwise,  within  and  without  the  state  of 
Washington,  any  and  all  kinds  of  personal  property,  and  in 
general  to  do  a  commission  merchant's  and  selling  agent's 
business;  to  acquire,  hold  and  dispose  of  inventions,  patents 
and  trademarks  in  the  United  States  or  foreign  countries; 
to  acquire,  hold  and  dispose  of  all  kinds  of  real  and  personal 
property,  and  to  carry  on  any  business,  make  contracts  and 
do  any  and  all  acts  necessary,  proper,  incidental  or  conven- 
ient to  said  business  not  inconsistent  with  the  laws  of  Wash- 
ington. 

§  785.    Distillers. 

To  manufacture,  produce,  distill,  redistill  and  rectify  wines, 
gins,  whiskies,  brandies,  rum,  beer,  ale,  and  porter,  and  the 
by-products  thereof,  and  to  purchase,  acquire,  hold,  sell  and 
otherwise  deal  in  and  dispose  of  said  products  throughout  the 


\ 


539  VARIOUS  PURPOSE  CLAUSES.  §  786 

United  States  and  elsewhere ;  to  acquire,  hold  and  dispose  of 
inventions,  patents  and  trademarks  in  the  United  States  and 
elsewhere;  to  acquire,  hold  and  dispose  of  any  and  all  kinds 
of  real  and  personal  property ;  to  carry  on  said  business,  as 
principal  or  agent,  within  and  without  the  state  of  Washing- 
ton; to  make  contracts  and  to  do  any  and  all  acts  necessary, 
proper,  incidental  or  convenient  to  said  purposes  and  objects 
not  inconsistent  with  the  laws  of  Washington. 

§  786.    Dock  and  Warehouse. 

To  receive,  load,  unload,  transfer,  store  in  warehouse  or 
otherwise,  to  hoist,  elevate  and  forward  by  wagon,  car,  barge, 
boat  or  other  vehicle,  on  land  or  water,  any  and  all  kinds  of 
goods,  wares,  merchandise,  commercial  commodity  or  thing 
of  value ;  to  erect,  construct,  purchase  or  otherwise  acquire, 
maintain,  hold,  sell  and  otherwise  dispose  of  docks,  wharves, 
warehouses,  terminal  and  transfer  structures  and  other  facili- 
ties, including  piers,  basins,  floating  docks,  bulkheads,  ele- 
vators, coal  bins,  pockets  and  chutes,  and  in  general  to  carry 
on  the  business  of  docking,  warehousing,  storage  and  wharfage, 
freighting,  elevating,  forwarding,  lighterage,  storing  and 
berthing  of  ships,  steam  vessels,  boats  and  every  other  kind 
of  water  craft ;  to  issue  storage,  dock  and  warehouse  receipts, 
negotiable  and  non-negotiable,  for  and  upon  all  kinds  of 
goods,  wares,  merchandise  and  any  other  commercial  com- 
modity or  thing  of  value;  to  purchase  or  otherwise  acquire, 
hold,  sell  or  otherwise  dispose  of  ships,  steamers,  vessels  and 
every  kind  of  water  craft,  and  all  goods,  wares,  merchandise, 
commodity  or  thing  of  value ;  to  make,  manufacture  or  other- 
wise acquire,  hold,  sell  or  otherwise  dispose  of  engines,  boilers, 
launches,  boats,  water  crafts  of  all  kinds,  and  any  article  or 
thing  of  value;  to  collect  and  receive  dockage,  wharfage  and 
storage  dues  and  other  compensation;  to  loan  money  on  the 
pledge  of  goods,  wares,  merchandise  and  other  property  or  of 
storage,  dock  or  warehouse  receipts  therefor;  and  to  advance 
•moneys  for  freights,  duties,  fire  and  marine  insurance,  and 
liens  of  every  description  upon  the  pledge  of  goods,  wares 
and  merchandise  or  other  property  received  on  storage  or 


§§787,788  CORPORATE   PROCEDURE.  540 

for  the  purpose  of  being  warehoused  or  forwarded  or  on  the 
pledge  of  storage,  dock  or  warehouse  receipts  therefor;  to  ac- 
quire, hold  and  dispose  of  inventions,  patents  and  trademarks 
in  the  United  States  or  foreign  countries ;  to  acquire,  hold  and 
dispose  of  all,  any  and  all  kinds  of  real  and  personal  prop- 
erty; to  conduct  said  business  as  principal  or  agent,  within 
and  without  the  state  of  Washington,  and  to  carry  on  any 
business,  to  make  contracts  and  do  any  and  all  acts  necessary, 
proper,  incidental  or  convenient  to  said  purposes  and  objects 
not  inconsistent  with  the  laws  of  Washington. 

§  787.    Electrical  Contractors. 

To  conduct  a  general  contracting  business  and  to  do  and 
supply  electrical  work  of  every  kind  and  description  in  elec- 
trical plants,  machinery,  appliances  and  supplies ;  to  construct, 
install,  equip,  repair  and  deal  in  plants,  works,  electrical  ma- 
chinery and  appliances  of  every  kind  for  generating,  storing, 
transmitting,  supplying  and  distributing  electricity  for  light, 
heat,  power  and  every  purpose,  public  and  private ;  to  acquire, 
hold  and  dispose  of  inventions,  patents  and  trademarks  in  the 
United  States  and  foreign  countries;  to  acquire,  hold  and 
dispose  of  any  and  all  kinds  of  real  and  personal  property ; 
to  conduct  said  business  and  every  part  thereof,  as  principal 
or  agent,  within  and  without  the  state  of  Washington ;  to 
carry  on  any  business,  make  contracts  and  do  any  and  every 
act  necessary,  proper,  incidental  or  convenient  to  said  pur- 
poses or  objects  not  inconsistent  with  the  laws  of  Washington. 

§  788.     Express  Business. 

To  carry  and  transfer  goods,  wares,  merchandise  and  per- 
sonal property  of  every  kind  from  any  place  or  places  to  any 
other  place  or  places  by  means  of  wagons  drawn  by  horses  or 
other  animals,  or  by  electric,  steam,  gasoline  or  other  motor 
cars,  boats  or  vehicles,  or  by  any  other  method  of  transpor- 
tation; to  contract  with  other  companies  or  individuals  to 
carry  or  transfer  such  property,  and  generally  to  carry  on  and' 
conduct  an  express  and  transportation  business;  to  acquire, 
hold  and  dispose  of  any  and  all  kinds  of  real  and  personal  prop- 


541  VARIOUS  PURPOSE  CLAUSES.  §§  789, 790 

crty;  to  conduct  said  business,  as  principal  or  agent,  within 
and  without  the  state  of  Washington;  to  carry  on  any  busi- 
ness, make  contracts  and  do  any  and  every  act  necessary, 
proper,  incidental  or  convenient  to  said  purposes  or  objects 
not  inconsistent  with  the  laws  of  Washington. 

§  789.    Fisheries  and  Canning. 

To  carry  on  the  business  of  buying,  catching,  salting,  pack- 
ing, canning,  storing,  selling  and  otherwise  dealing  in  fish 
and  sea  food  of  every  kind,  whether  from  fresh  or  salt  water, 
and  products  thereof ;  to  acquire,  hold  and  dispose  of  any  and 
all  kinds  of  fishing  boats,  nets,  tackle  and  appliances  of  every 
description  for  taking  and  catching  fish ;  to  acquire,  establish, 
maintain  and  dispose  of  factories,  agencies  and  depots  for 
salting,  packing,  canning,  storing  and  otherwise  preserving 
and  dealing  in  all  kinds  of  food,  fishes  and  products  thereof; 
to  acquire,  hold  and  dispose  of  inventions,  patents  and  trade- 
marks in  the  United  States  and  foreign  countries ;  to  acquire, 
hold  and  dispose  of  any  and  all  kinds  of  real  and  personal 
property;  to  conduct  said  business,  as  principal  or  agent, 
within  and  without  the  state  of  Washington,  and  to  carry  on 
any  business  and  do  any  and  every  act  necessary,  proper,  in- 
cidental or  convenient  to  said  purposes  and  objects  not  incon- 
sistent with  the  laws  of  Washington. 

§  790.    MiUing. 

To  grow,  buy,  handle,  grind,  mill,  deal  in  and  deal  with, 
sell  and  otherwise  dispose  of  wheat,  rye,  barley,  oats,  buck- 
wheat, corn  and  other  grains  and  cereals ;  to  manufacture  said 
grains  and  cereals  into  flour,  meal,  foodstuffs  and  every  com- 
modity produced  therefrom ;  to  buy,  handle,  store,  warehouse, 
deal  in  and  deal  with,  sell  and  otherwise  dispose  of  said  grains, 
cereals,  flour,  meal,  foodstuffs  and  commodities;  to  buy,  ac- 
quire, own,  hold,  sell  or  otherwise  dispose  of  lands,  buildings, 
wharves,  docks,  boats,  barges,  ships,  transportation  lines  and 
systems  by  land  and  water,  warehouses,  elevators,  mills,  struc- 
tures, machinery  and  appliances  suitable  or  desired  for  purchas- 
ing, treating,  handling,  milling,  storing,  dealing  in,  selling  or 
otherwise  disposing  of  or  utilizing  any  or  all  of  said  grains. 


§§791,792  CORPORATE   PROCEDURE.  542 

cereals,  foodstuffs  and  commodities ;  to  acquire,  hold  and  dis- 
pose of  inventions,  patents,  trademarks  in  the  United  States  or 
forei^  countries ;  to  acquire,  hold  and  dispose  of  any  and  all 
kinds  of  real  and  personal  property ;  to  conduct  said  business 
and  any  part  thereof,  as  principal  or  agent,  within  and  without 
the  state  of  Washington,  and  to  carry  on  any  business  and  do 
any  and  every  act  necessary,  proper,  incidental  or  convenient 
to  said  purposes  and  objects  not  inconsistent  with  the  laws  of 
Washington. 

§  791.     Lumber. 

To  buy,  lease,  acquire,  hold,  own,  sell  and  otherwise  dispose 
of  timber,  timber  lands,  lumber,  mills,  sawmills,  plants,  mill- 
sites,  booms,  boom-sites,  roads,  ways,  logging  roads,  railroads, 
machinery,  steam,  electric,  gasoline  and  other  engines,  water- 
power  sites  and  machinery  therefor,  ships,  boats,  barges,  steam, 
electric  and  gasoline  cars,  wagons,  horses,  and  any  other  means 
of  transportation  by  any  form  of  power  or  energy  now  known 
or  hereafter  discovered,  and  to  purchase,  acquire,  o^vn,  hold, 
manufacture,  sell,  and  otherwise  dispose  of  any  and  all  kinds 
of  timber,  lumber  and  wood,  and  product  or  products  thereof ; 
and  in  general  to  carry  on  the  business  of  timber  and  lumber 
manufacturers  and  merchants,  as  principal  or  agent,  within 
and  without  the  state  of  Washington;  to  acquire,  hold  and 
dispose  of  inventions,  patents  and  trademarks  in  the  United 
States  or  foreign  countries;  to  acquire,  hold  and  dispose  of 
any  and  every  kind  of  real  or  personal  property,  and  to  carry 
on  any  business,  make  contracts  and  do  any  and  every  act 
necessary,  proper,  incidental  or  convenient  to  said  purposes 
and  objects  not  inconsistent  with  the  laws  of  Washington. 

§  792.    Leather. 

To  manufacture,  produce,  tan,  purchase  and  otherwise  ac- 
quire, hold  and  sell  or  otherwise  dispose  of  leather,  lumber  and 
belting;  to  acquire,  hold  and  dispose  of  lands,  timber,  mills, 
plants,  machinery,  hides,  bark  supplies  and  other  articles  used 
in  connection  with  the  tanning  and  manufacture  of  leather; 
to  acquire,  hold  and  dispose  of  inventions,  patents  and  trade- 
marks in  the  United   States   and  foreign   countries;   to  ac- 


543  VARIOUS  PURPOSE  CLAUSES.  §§  793, 794 

quire,  hold  and  dispose  of  any  and  all  kinds  of  real  and 
personal  property;  to  conduct  said  business,  as  principal  or 
agent,  within  and  without  the  state  of  Washington;  and  to 
carry  on  any  business,  make  contracts  and  do  any  and  every 
act  necessary,  proper,  incidental  or  convenient  to  said  pur- 
poses and  objects  not  inconsistent  with  the  laws  of  Washing- 
ton. 

§  793.    Mining. 

To  explore,  locate,  acquire  by  purchase,  lease  or  otherwise 
hold,  own,  work,  exercise  and  develop,  sell,  lease,  mortgage 
or  otherwise  dispose  of  any  mines,  mining  rights  and  metallif- 
erous land,  and  any  interest  therein;  to  acquire,  smelt,  re- 
duce, refine,  mill  and  otherwise  treat,  own,  hold,  sell  and  other- 
wise dispose  of  ores,  minerals  and  metals ;  to  crush,  win,  get, 
quarry,  calcine,  refine,  dress,  amalgamate,  manipulate  and 
prepare  for  market  mineral  substances  of  all  kinds;  to  buy, 
build,  construct,  and  otherwise  acquire,  own,  hold,  sell,  lease, 
mortgage  or  otherwise  dispose  of  ways,  tramways,  railways, 
bridges,  waters,  watercourses,  reservoirs,  aqueducts,  wharves, 
docks,  factories,  warehouses,  furnaces,  crushing  works,  hy- 
draulic works,  electrical  works,  sawmills,  cars,  wagons,  boats, 
ships,  horses,  engines,  motors  and  vehicles  of  transportation  of 
every  kind,  electric,  steam  and  water-power  plants  and  ma- 
chinery and  appliances  therefor,  and  for  the  transmission 
thereof;  to  acquire,  hold  and  dispose  of  inventions,  patents 
and  trademarks  in  the  United  States  and  foreign  countries; 
to  acquire,  hold  and  dispose  of  any  and  all  kinds  of  real  and 
personal  property ;  to  conduct  said  mining  and  other  business, 
as  principal  or  agent,  within  and  without  the  state  of  Wash- 
ington, and  to  carry  on  any  business,  make  contracts  and  do 
any  and  every  act  necessary,  proper,  incidental  or  conven- 
ient to  said  purposes  and  objects  not  inconsistent  with  the 
laws  of  Washington. 

§  794.     Paper. 

To  manufacture,  produce,  purchase  or  otherwise  acquire, 
hold,  own,  sell  or  otherwise  deal  in  and  dispose  of  paper,  wood, 
pulp,  fiber,  iron  pyrites,  clay,  sulphur,  coal,  agolite,  fibrous 


§  795  CORPORATE  PROCEDURE.  544 

minerals  and  materials,  and  any  and  all  ingredients,  products, 
by-products  and  compounds  thereof  and  used  in  connection 
with  their  manufacture ;  to  acquire,  hold  and  dispose  of  mines, 
wood  lands,  steam,  electric  and  water-power  and  water  rights, 
ways,  roads,  railways,  watercourses  and  means  of  transmis- 
sion and  vehicles  of  transportation ;  to  acquire,  hold  and  dis- 
pose of  inventions,  patents  and  trademarks  in  the  United 
States  or  foreign  countries ;  to  acquire,  hold  and  dispose  of  any 
and  all  kinds  of  real  and  personal  property ;  to  carry  on  said 
business  and  any  part  thereof,  as  principal  or  agent,  within 
and  without  the  state  of  Washington,  and  to  carry  on  any 
business,  make  contracts  and  do  any  and  every  act  necessary, 
proper,  incidental  or  convenient  to  any  of  said  purposes  and 
objects   not  inconsistent  with  the  laws  of  Washington. 

§  795.     Railroads. 
To  build,  construct,  maintain  and  operate  a  steam,  electric 

or  other  railway  or  railroad    from   to   ,  which 

places  shall  be  the  termini  of  the  railway  or  railroad ;  to  operate 
the  same  by  steam,  electric  or  other  power  now  known  or  here- 
after discovered ;  to  acquire,  hold  and  dispose  of  ways,  rights 
of  way,  yards,  depots,  stations  and  terminals ;  to  build,  con- 
struct, erect  and  otherwise  acquire,  hold  and  dispose  of  works, 
plants  and  systems  for  the  manufacture,  production  and  gen- 
eration of  steam  and  electrical  energy,  light,  heat,  and  power 
and  the  transmission  thereof;  to  build,  acquire,  hold  and  dis- 
pose of  telephone  and  telegraph  plants,  facilities  and  systems 
and  other  means  of  communication ;  to  build,  acquire,  hold  and 
dispose  of  waters,  docks,  wharves,  boats,  sailing  and  steam 
boats,  and  ships  and  lines  and  systems  thereof;  to  build,  ac- 
quire, own,  hold  and  dispose  of,  directly  and  indirectly, 
wagons,  cars,  boats,  ships,  vehicles,  engines  and  motors  of 
every  kind;  to  carry,  convey,  transport  and  transmit  for  toll 
and  hire  persons,  property,  messages  and  communications ;  to 
acquire,  hold  and  dispose  of  inventions,  patents  and  trade- 
marks in  the  United  States  and  foreign  countries ;  to  acquire, 
hold  and  dispose  of  any  and  all  kinds  of  real  and  personal 
property ;  to  conduct  and  exercise  said  powers,  purposes  and 
business  and  any  part  thereof,  as  principal  or  agent,  within 


545  VARIOUS  PURPOSE   CLAUSES.  §  796 

and  without  the  state  of  "Washington,  and  to  carry  on  any  busi- 
ness, make  any  contracts  and  do  any  and  every  act  necessary, 
proper,  incidental  or  convenient  to  said  purposes  and  objects 
not  inconsistent  with  the  laws  of  Washington. 

§  796.     Real  Estate  and  Brokerage. 

To  act  as  agent,  broker  or  attorney  in  fact  for  individuals 
and  corporations  in  buying,  selling,  managing,  leasing,  rent- 
ing, mortgaging  and  otherwise  dealing  in  and  disposing  of  real 
and  personal  property,  leases  and  mortgages  thereon,  and 
any  and  every  interest  therein  and  collateral  or  appurtenant 
thereto,  including  choses  in  action  and  judgments;  to  make 
and  obtain  loans;  to  effect  insurance  against  fire  and  other 
risks;  to  register,  file  and  record  mortgages,  deeds  and  other 
instruments;  to  investigate  and  report  upon  the  credit  and 
financial  solvency  and  reliability  of  borrowers,  sureties  and 
persons  dealing  in  such  property;  to  acquire,  hold  and  dis- 
pose of  inventions,  patents  and  trademarks  in  the  United 
States  and  foreign  countries;  to  acquire,  hold  and  dispose  of 
any  and  all  kinds  of  real  and  personal  property,  and  in  gen- 
eral to  conduct  a  real  estate  and  brokerage  business,  as  prin- 
cipal or  agent  within  and  without  the  state  of  Washington,  and 
to  conduct  any  business,  make  contracts  and  do  any  and  every 
act  necessary,  proper,  incidental  or  convenient  to  said  pur- 
poses and  objects  not  inconsistent  with  the  laws  of  Wash- 
ington. 


FORMS. 

§  797. 

ARTICLES   OF  INCORPORATION  OF  KING  COUNTY 
CONSTRUCTION  COMPANY. 

These  presents  witness  that  we,  James  Smith,  Albert  Jones, 
and  William  King,  being  desirous  of  forming  a  corporation 
for  the  purposes  hereinafter  specified,  and  in  conformity  with 
the  laws  of  the  State  of  Washington,  do  make  and  subscribe 
the  following  written  Articles  of  Incorporation  in  triplicate. 

ARTICLE  I. 
The  corporate  name  of  the  company  shall  be:  King  Comity 
Construction  Company. 

ARTICLE  IL 
The  objects  for  which  the  company  shall  be  formed  are :  To 
build,  construct,  improve,  equip,  tear  down,  remove  and  do 
any  work  upon  buildings  and  their  foundations,  excavations, 
structures  and  machines  of  every  kind  on  lands  and  waters, 
and  any  and  all  kinds  of  streets,  roads,  ways,  tramways,  rail- 
roads, street  railways,  branches,  extensions  and  sidings 
thereof,  dams,  bridges,  reservoirs,  watercourses,  flumes  and 
wharves,  canals,  sewers,  tunnels  and  subways,  plants  for 
furnishing  light,  heat  and  power,  by  electricity  or  otherwise, 
systems,  machinery,  appliances  and  devices  for  the  generation 
of  steam,  electrical  or  other  power  and  force  and  energy  of 
every  kind;  to  acquire,  hold  and  dispose  of  inventions,  patents 
and  trademarks  relating  thereto  in  the  United  States  or  for- 
eign countries;  to  acquire,  hold  and  dispose  of  any  and  all 
kinds  of  real  and  personal  property ;  to  carry  on  said  business, 
as  principal  or  agent,  within  or  without  the  state  of  Wash- 
ington ;  and  to  carry  on  any  business,  make  contracts  and  do 
any  and  all  acts  necessary,  proper,  incidental  or  convenient 
to  said  purposes  and  objects  not  inconsistent  with  the  laws  of 

Washington. 

(547) 


§  79?!  CORPORATE  PROCEDURE.  548 

ARTICLE  III. 
The  amount  of  the  capital  stock  of  the  company  shall  be 
($100,000)  one  hundred  thousand  dollars. 

ARTICLE  IV. 
The  time  of  existence  of  the  company  shall  be  fifty  years. 

ARTICLE  V. 

The  number  of  shares  of  which  the  capital  stock  of  the  com- 
pany shall  consist  shall  be  (1,000)  one  thousand. 
ARTICLE  VI. 

The  number  of  trustees  of  the  company  shall  be  three,  and 
the  names  and  residences  of  the  trustees  who  shall  manage 
the  concerns  of  the  company  until  the  third  Tuesday  in  De- 
cember, 1912,  are 

Names.  Residences. 

James  Smith  No.  1  Avenue  A,  Seattle 

Albert  Jones  No.  1  Avenue  B,  Seattle 

William  King  No.  1  Avenue  C,  Seattle 

ARTICLE  VII. 

The  principal  place  of  business  of  the  company  is  to  be 
located  in  the  city  of  Seattle,  county  of  King,  state  of  Wash- 
ington. 

In  witness  whereof  we  have  this  first  day  of  September, 
A.  D.  1912,  hereunto  set  our  hands  and  seals  in  triplicate. 

JAMES  SMITH.  [Seal] 
ALBERT  JONES.  [Seal] 
WILLIAM  KING.     [Seal] 

Signed,  sealed  and  delivered  in  the  presence  of 

BENJAMIN  ALLEN. 
JOHN  WOOD. 

State  of  Washington, 

County  of  King, — ss. 

I,  Joseph  White,  a  notary  public  in  and  for  the  state  of 
Washington,    duly    commissioned,  sworn    and    qualified,  do 


549  FORMS.  §§  798, 799 

hereby  certify  that  on  this  second  day  of  September,  A.  D. 
1912,  personally  appeared  James  Smith,  Albert  Jones  and 
William  King,  to  me  known  to  be  the  individuals  described  in 
and  who  executed  the  within  instrument  and  acknowledged 
that  they  signed  and  sealed  the  same  as  their  free  and  volun- 
tary act  and  deed  and  for  the  uses  and  purposes  therein  men- 
tioned. 

Given  under  my  hand  and  official  seal  this  second  day  of 
September,  A.  D.  1912. 

[Notarial  Seal]  JOSEPH  WHITE, 

Notary  Public. 

§  798.  MINUTES 

of 

First  Meeting  of  the  Trustees  of  King  County  Construction 
Company,  Held  at  No.  100  Second  Avenue,  Seattle,  Wash- 
ington, on  September  10,  1912,  at  10:30  o'clock  in  the 
forenoon. 

Present :  Messrs.  James  Smith, 
Albert  Jones, 
William  King, 
being  all  of  the  trustees  named  in  the  Articles  of  Incorpora- 
tion of  the  company. 

The  meeting  was  called  to  order  by  Mr.  King. 

Mr.  King  was  elected  temporary  chairman  and  Mr.  Smith 
was  elected  secretary  pro  tempore. 

The  chairman  presented  the  notice  of  the  First  Trustees* 
Meeting,  which  with  proof  of  service  required  by  law  was 
read  and  ordered  spread  upon  the  minutes  of  the  meeting  and 
is  as  follows: 

§  799. 

NOTICE  OF  FIRST  MEETING  OF  TRUSTEES  OF  KING 
COUNTY  CONSTRUCTION  COMPANY. 

The  undersigned,  one  of  the  trustees  named  in  the  Articles 
of  Incorporation  of  the  above-named  company,  hereby  calls 
the  first  meeting  of  the  trustees  of  said  company,  to  be  held 


§  800  CORPORATE  PROCEDURE.  550 

at  No.  100  Second  Avenue,  Seattle,  Washington,  on  the  tenth 
day  of  September,  1912,  at  10:30  o'clock  in  the  forenoon. 
Dated  Seattle,  Washington,  September  5.  1912. 

(Signed)     WILLIAM  KING, 

Tru.stee. 

State  of  Washington, 
King  County, — ss. 

William  King,  first  being  duly  sworn,  deposes  and  says  that 
on  the  fifth  day  of  September,  1912,  he  personally  delivered 
the  annexed  notice  of  meeting  to  each  of  the  persons  named 
in  the  Articles  of  Incorporation  of  King  County  Construction 
Company. 

(Signed)     WILLIAM  KING. 

Subscribed  and  sworn  to  before  me  this  fifth  day  of  Sep- 
tember, 1912. 

JOSEPH.  WHITE, 
Notary  Public  in  and  for  the  State  of  Washington,  Residing 
at  1616  E.  Howell  St.,  Seattle,  Washington. 

The  original  notice  and  proof  of  service  was  thereupon  or- 
dered filed  among  the  records  of  the  company. 

§  800. 

The  chairman  then  produced  and  read  the  oath  taken  and 
subscribed  by  the  trustees  as  follows : 

State  of  Washington, 
County  of  King, — ss. 

James  Smith,  Albert  Jones  and  William  King,  being  first 
duly  sworn,  on  their  oath  say  that  they  are  the  trustees  named 
in  the  Articles  of  Incorporation  of  the  King  County  Construc- 
tion Company,  and  that  they  will  each  faithfully  and  honestly 
discharge  the  duties  of  their  office  as  trustees. 

JAMES  SMITH. 

ALBERT  JONES. 

[WILLIAM  KING. 


551  FORMS.  §  801 

Subscribed  and  sworn  to  before  me  this  fourth  day  of  Sep- 
tember, 1912. 

JOSEPH  WHITE, 

Notary  Public  in  and  for  the  State  of  Washington,  Residing 
at  1616  East  Howell  St.,  Seattle,  Washington. 

The  original  oath  was  then  ordered  filed  among  the  records 
of  the  company. 

The  chairman  then  produced  the  triplicate  copy  of  the 
Articles  of  Incorporation  of  the  company  on  file  and  of  record 
in  the  office  of  the  Secretary  of  State  and  the  office  of  the 
county  auditor  of  King  County,  in  which  the  principal  place 
of  business  of  the  company  was  located,  and  the  same  was 
read  and  ordered  spread  upon  the  minutes  of  the  meeting 
and  is  as  follows:   [Take  in  Copy  of  Articles.] 

The  said  triplicate  original  Articles  of  Incorporation  were 
thereupon  ordered  filed  among  the  records  of  the  company. 

At  the  request  of  the  Chairman,  counsel  for  the  company 
then  produced  and  read  proposed  by-laws  of  the  company  as 
follows : 

§  801. 
BY-LAWS    OF    KING    COUNTY    CONSTRUCTION 
COMPANY. 

ARTICLE  I. 

Meetings  of  Stockholders. 

Section  1.  The  annual  meeting  of  stockholders  for  the  elec- 
tion of  trustees  and  general  corporate  action  shall  be  held  at 
the  principal  office  of  the  company  at  Seattle,  King  County, 
Washington,  on  the  third  Tuesday  in  December,  in  the  year 
1912,  and  each  year  thereafter  at  12  o'clock  M. 

Sec.  2.  Special  meetings  of  the  stockholders  may  be  called 
and  held  at  the  said  office  of  the  company  at  any  time  by 
order  of  the  board  of  trustees,  and  shall  be  called  whenever 
stockholders  of  record  owning  one-tenth  of  the  capital  stock 
of  the  company  issued  and  outstanding  at  the  time  shall  make 
application  in  writing  therefor  to  the  board  of  trustees  stating 


§  801  CORPORATE  PROCEDURE.  552 

the  object  of  such  meeting.  The  business  transacted  at  special 
meetings  shall  be  confined  to  the  objects  stated  in  the  call. 

Sec.  3.  Notice  of  the  time,  place  and  object  of  each  annual 
or  special  meeting  of  stockholders  shall  be  given  as  prescribed 
by  statute  in  any  case,  and  shall  be  mailed  to  each  stockholder 
at  least  ten  days  before  the  date  set  for  each  meeting,  ad- 
dressed to  him  at  his  place  of  residence  or  business,  as  the 
same  appears  in  the  list  of  addresses  which  shall  be  kept  by 
the  secretary  of  the  company. 

Sec.  4.  At  every  election  and  meeting  of  the  stockholders 
each  stockholder  shall  be  entitled  to  one  vote  in  person  or  by 
proxy  for  each  share  of  the  capital  stock  owned  by  him  and 
standing  in  his  name  on  the  books  of  the  company.  Each 
owner  of  stock  entitled  to  vote  may  vote  in  person  or  by 
proxy  duly  appointed  in  writing. 

Sec.  5.  At  all  stockholders'  meetings  a  majority  of  the 
shares  of  stock  issued  and  outstanding  at  the  time  and  having 
voting  power,  represented  in  person  or  by  proxy,  shall  con- 
stitute a  quorum.  Meetings  at  which  less  than  a  majority 
of  the  shares  of  outstanding  stock  having  voting  power  are 
represented  may  be  adjourned  to  a  future  date  by  those  who 
attend,  provided  that  notice  of  such  adjournment  be  mailed 
to  each  owner  of  stock  at  least  three  days  before  the  date  at 
which  such  meeting  is  adjourned,  addressed  to  his  place  of 
business  or  residence  as  stated  in  the  list  of  addresses  kept  by 
the  secretary  of  the  company. 

ARTICLE  II. 

Trustees. 

Section  1.  The  affairs  of  the  company  shall  be  managed 
by  a  board  of  three  trustees. 

Sec.  2.  The  trustees,  except  those  first  appointed  by  the 
articles,  shall  be  elected  by  the  stockholders  at  their  annual 
meeting  by  ballot  except  as  otherwise  provided  herein,  and 
shall  hold  office  for  one  year  and  until  their  successors  are 
elected  respectively. 

Sec.  3.  Vacancies  in  the  board  of  trustees,  whether  original 
vacancies  or  caused  by  resignation  or  otherwise,  may  be  filled 


553  FORMS.  §  801 

by  the  board  at  any  meeting    thereof  at  which  a  quorum  is 
present. 

Sec.  4.  The  board  of  trustees  shall  have  the  general  man- 
agement and  control  of  all  the  property,  business  and  con- 
cerns of  the  company ;  they  shall  define  and  limit  the  powers 
and  duties  of  all  committees,  officers,  agents  and  employees  of 
the  company  not  otherwise  provided  for  by  these  by-laws; 
shall  fix  all  salaries,  and  may  require  such  bonds  as  they  deem 
proper. 

Sec.  5.  They  shall  declare  all  dividends  upon  the  capital 
stock  of  the  company  and  generally  do  any  and  every  lawful 
act  requisite  or  advisable  in  order  to  effect  the  purposes  of  the 
corporation.  They  shall  also  keep  a  record  of  their  proceed- 
ings. 

Sec.  6.  The  board  of  trustees  shall  annually  elect  from 
their  own  number  a  president  and  one  or  more  vice-presidents 
of  the  company.  They  shall  also  annually  elect  or  appoint 
a  secretary,  treasurer  and  general  manager,  who  may  or  may 
not  be  trustees  as  the  board  may  in  each  case  determine. 

Sec.  7.  Meetings  of  the  board  of  trustees  shall  be  held  at 
such  times  and  places  within  this  state  as  the  board  itself  may 
elect  or  may  be  called  at  any  time  by  the  president  or  by  one- 
fourth  of  the  members  of  the  board  on  such  notice  as  may  be 
deemed  advisable  by  those  calling  the  meeting. 

Sec.  8.  A  majority  of  the  trustees  shall  constitute  a  quorum 
for  the  transaction  of  business,  but  a  less  number  may  adjourn 
from  time  to  time ;  the  secretary  shall  give  such  notice  as  he 
may  deem  proper  of  such  adjournment  to  the  absent  trustees. 

Sec.  9.  The  first  meeting  of  the  board  of  trustees,  after 
each  annual  meeting  of  stockholders,  shall  be  held  without  un- 
necessary delay  for  the  election  of  officers  and  transaction  of 
other  business. 

ARTICLE  III. 

Officers. 

Section  1.  The  officers  of  the  company  shall  be  a  president, 
one  or  more  vice-presidents,  a  secretary  and  a  treasurer.  The 
offices  of  secretary  and  treasurer  may  be  filled  by  the  same  per- 


§  801  CORPORATE  PROCEDURE.  554 

son,  as  also  may  those  of  vice-president  and  general  manager 
if  such  there  be. 

Sec.  2.  All  of  said  officers  other  than  the  president  may  be 
removed  at  any  time  by  a  vote  of  a  majority  of  the  board 
of  trustees,  but  otherwise  they  shall  hold  their  respective  offices 
for  one  year  or  until  their  successors  are  elected.  Any  and  all 
vacancies  that  may  occur  in  anj^  of  said  offices  may  be  filled 
by  the  trustees  at  any  meeting  of  the  board. 

Sec.  3.  The  board  of  trustees  may  elect  or  appoint  such 
other  officers,  agents  and  employees  of  the  company  as  they 
may  from  time  to  time  deem  best,  and  upon  such  terms  as 
they  may  in  each  case  prescribe. 

ARTICLE  IV. 

President  and  Vice-president. 

Section  1.  The  president  shall  be  the  chief  executive  offi- 
cer of  the  company,  and  shall  preside  at  all  meetings  of  the 
stockholders  and  of  the  board  of  trustees.  He  shall  sign  all 
certificates  of  stock,  countersign  all  checks,  and  sign  or 
countersign  all  bonds,  notes  and  other  evidences  of  indebted- 
ness issued  by  the  company,  and  shall,  on  behalf  of  the 
company,  sign  all  contracts,  unless  some  other  officer  be 
specifically  authorized  so  to  do  by  the  board  of  trustees. 

Sec.  2.  He  shall  have  the  general  oversight,  care  and  man- 
agement of  all  the  property,  business  management  and  busi- 
ness of  the  company,  subject  always  to  the  direction  and  con- 
trol of  the  board  of  trustees.  He  shall  make  a  report  in  writ- 
ing to  the  stockholders  at  each  annual  meeting  of  the  earnings 
and  general  business  of  the  company,  which  report  shall  be 
first  submitted  to  the  board  of  trustees  for  their  approval. 

Sec.  3.  In  case  of  the  absence  or  disability  of  the  president, 
his  powers  and  duties  shall  devolve  upon  and  be  performed 
by  the  vice-president;  otherwise  the  vice-president  shall  have 
such  powers  and  perform  such  duties  as  may  be  prescribed 
from  time  to  time  by  the  board  of  trustees. 


555  FORMS.  §  801 

ARTICLE  V. 

General  Manager, 

The  general  manager,  if  such  there  be,  shall,  subject  to  the 
board  of  trustees,  control  and  have  general  charge  of  the  con- 
struction work  and  operations  of  the  company's  business. 

ARTICLE  VI. 

Secretary, 

Section  1.  The  secretary  shall  be  ex-officio  secretary  of  all 
stockholders'  meetings  and  of  the  board  of  trustees,  and  shall 
attend  their  meetings,  keep  the  records  of  the  proceedings  at 
such  meetings  and  be  the  custodian  of  the  same. 

Sec.  2.  He  shall,  subject  to  the  direction  of  the  board  of 
trustees,  give  all  notices  required  for  the  election  of  trustees 
and  for  meetings  of  trustees  and  stockholders,  and  shall  per- 
form such  other  duties  as  may  from  time  to  time  be  assigned 
to  him  by  the  board  of  trustees. 

Sec.  3.  In  case  of  the  absence  or  disability  of  the  secre- 
tary, the  board  of  trustees  may  appoint  a  secretary  pro  tem. 
to  perform  his  duties. 

Sec.  4.  The  secretary  shall  also  have  charge  of  the  cor- 
porate seal  of  the  company  and  shall,  in  the  course  of  its  busi- 
ness, affix  the  same  to  all  bonds  and  stock  certificates  issued; 
and  when  authorized  by  the  board  of  trustees,  he  shall  also 
affix  said  seal  to  contracts  and  other  instruments. 

ARTICLE  VII. 

Treasurer. 

Section  1.  The  treasurer  shall  have  the  custody  of  all 
moneys  belonging  to  the  company,  and  shall  keep  the  same 
deposited  to  the  credit  of  and  in  the  name  of  the  company  in 
such  place  or  places  as  the  board  of  trustees  may  from  time 
to  time  designate ;  and  shall  also  disburse  the  funds  of  the 
company  under  the  direction  of  the  board  of  trustees. 

Sec.  2.  He  shall  keep  accurate  books  of  account  showing 
all  receipts  and  disbursements  of  the  company,  which  shall  at 


§  801  CORPORATE  PROCEDURE.  556 

all  times  be  open  to  the  inspection  of  the  trustees  and  the 
president. 

Sec.  3.  He  shall  si^,  or  countersign,  all  cheeks,  drafts, 
orders  for  money,  notes  and  receipts  and  certificates  of  stock 
of  the  company. 

Sec.  4.  He  shall,  whenever  called  upon,  render  to  the 
board  of  trustees  reports  in  writing  of  the  business  and  con- 
dition of  the  company,  and  shall  perform  such  other  duties 
and  have  such  other  powers  as  may  from  time  to  time  be  pre- 
scribed by  the  board  of  trustees. 

ARTICLE  VIII. 
Capital  Stock,  Its  Transfer  and  Registration. 

Section  1.  The  capital  stock  of  the  company  shall  be  of  two 
classes;  one-half  thereof  to  be  preferred  stock  and  one-half 
common  stock. 

Sec.  2.  The  holders  of  the  preferred  stock  shall  be  entitled 
to  receive,  when  and  as  any  dividends  are  declared  by  the  trus- 
tees, dividends  at  the  rate  of  and  not  exceeding  seven  per 
centum  per  annum.  Such  dividends  shall  be  cumulative,  and 
if  the  profits  of  any  one  year  declarable  as  dividends  shall  not 
be  sufficient  to  pay  or  warrant  the  declaration  of  dividends, 
then  the  same  shall  be  made  up  from  profits  of  a  later  period 
until  the  full  amount  of  dividends  herein  specified  without 
interest  shall  have  been  paid  upon  or  set  apart  for  the  pre- 
ferred stock  before  any  dividend  is  declared  or  paid  on  the 
common  stock.  The  balance  of  the  net  profits  of  the  company 
declarable  as  dividends  may  be  distributed  among  the  holders 
of  the  common  stock  at  such  times  as  may  be  fixed  by  the 
trustees;  the  par  value  of  the  preferred  stock  and  accumu- 
lated and  unpaid  dividends  thereon  shall  also,  in  the  event  of 
the  dissolution  of  the  company  and  disposition  of  its  assets, 
be  paid  in  full  before  any  sum  whatever  is  paid  on  account  of 
the  common  stock,  and  thereafter  the  common  stock  shall  be 
entitled  to  the  entire  assets  remaining. 

Sec.  3.  All  transfers  of  stock  shall  be  signed  by  the  stock- 
holders in  person  or  by  attorney  in  a  book  to  be  provided  for 
that  purpose.    At  the  time  of  each  transfer  the  old  certificate 


557  FORMS.  §  802 

for  the  shares  transferred  shall  be  surrendered  and  canceled, 
and  a  new  certificate  issued  in  lieu  thereof. 

Sec.  4.  All  certificates  of  stock  issued  by  the  company  shall 
bear  the  seal  of  the  company  and  be  signed  by  the  president 
or  one  of  the  vice-presidents  and  by  the  treasurer,  and  shall 
be  countersigned  by  the  transfer  agent  and  registrar  of  trans- 
fers of  the  company  if  such  there  be. 

Sec.  5.  The  board  of  trustees  may  appoint  a  transfer 
agent  to  facilitate  transfers  by  stockholders  under  such  regu- 
lations as  the  board  may  from  time  to  time  prescribe.  They 
may  also  appoint  a  registrar  of  transfers  of  stock.  After  the 
appointment  of  such  registrar  of  transfers,  no  certificate  there- 
after issued  for  stock  shall  be  binding  upon  the  corporation, 
or  shall  have  any  validity,  unless  countersigned  by  such  regis- 
trar of  transfers. 

ARTICLE  IX. 

Seal. 
Section  1.  The  corporate  seal  of  the  company  shall  con- 
tain the  words  ''King  County  Construction  Co."  on  the  mar- 
gin and  the  words  "Incorporated  Washington"  around  the 
figures  "1912"  in  the  center.  The  seal  shall  be  kept  in  the 
charge  and  custody  of  the  secretary  of  the  company  and  must 
be  affixed  to  all  instruments  requiring  a  seal. 

ARTICLE  X. 

Amendments. 

The  by-laws  may  be  altered  or  amended  at  any  meeting  of 
the  board  of  trustees  by  a  vote  of  the  majority  of  the  board. 

After  full  consideration  and  discussion  of  each  article  and 
section  thereof,  said  by-laws  were,  on  motion  duly  made  and 
seconded,  unanimously  adopted  as  the  by-laws  of  the  company. 

§  802. 

On  motion  duly  made  and  carried,  the  following  was 
adopted  as  the  stock  certificate  of  the  company; 


§  802  CORPORATE  PROCEDURE.  558 

KING  COUNTY  CONSTRUCTION  COMPANY. 

No. Incorporated  Under  the  Laws        Shares 

of  Washington, 

Authorized  Capital  Stock,  $100,000. 

$50,000  Preferred  Stock— $50,000  Common  Stock. 

r  Preferred  Stock  "^ 

J  or  L 

I    Common  Stock  J 

This  certifies  that entitled  to shares  of  the 

commJn'^  ^^^^^  ^^  ^i°=  County  Construction  Company,  trans- 
ferable only  on  the  books  of  the  company  by  the  holder  hereof 
in  person  or  by  attorney  upon  surrender  of  this  certificate  duly 
indorsed. 

The  preferred  stock,  as  more  fully  provided  in  the  by-laws 
of  the  company,  is  entitled,  in  preference  to  the  common  stock, 
to  cumulative  dividends  at  the  rate  of  seven  per  centum  yearly 
and  to  payment  of  its  par  value  and  the  amount  of  such  cumu- 
lative dividends  then  unpaid  in  any  distribution  of  assets. 

In  witness  whereof  the  said  company  has  caused  its  cor- 
porate seal  to  be  affixed  hereto  and  this  certificate  to  be  signed 
by  its  president  or  vice-president  and  secretary  or  treasurer. 

[Corporate  Seal]  , 

President. 


Secretary. 

(Indorsement  for  Transfer:) 

For  value  received   ....  hereby  sell,  assign  and  transfer 

unto shares  of  the  capital  represented  by  the  within 

certificate,    and   hereby   irrevocably    constitute    and   appoint 

,  attorney,  to  transfer  the  said  stock  on  the  books  of 

the  within  named  company,  with  full  power  of  substitution  in 
the  premises. 

Dated ,19 

In  presence  of 


559 


FORMS. 


§§  803  ,80-1 


A  recess  was  then  taken  and  reassembling  the  Chairman 
announced  that  the  entire  capital  stock  had  been  subscribed. 
The  subscription  agreement  was  read  and  ordered  spread  upon 
the  minutes  of  the  meeting,  and  is  as  follows : 

§  803.  SUBSCRIPTION  TO  STOCK. 

King  County  Construction  Company, 

We,  the  undersigned,  severally  agree  with  King  County 
Construction  Company,  and  with  each  other,  to  take  the  num- 
ber of  shares  of  stock  in  said  company  set  opposite  our  names 
at  the  par  value  of  $100  each,  and  to  pay  for  such  shares  of 
stock  at  such  times  and  in  such  installments  as  the  board  of 
trustees  of  said  company  may  by  resolution  require : 


Names. 

P.  O.  Addresses. 

No.  of  Shares 
Common. 

No.  of  SliaroB 
Preferred. 

James  Smith 
Albert  James 
William  King 
John  Edwards 

30  Howell  St.,  Seattle,  Wash. 
50  Cherry  St.,  Seattle,  Wash. 
40  Pike  St.,  Seattle,  Wash. 
10  Cherry  St.,  Seattle,  Wash. 

1 

2 

2 

4&5 

500 

Dated  Seattle,  Washington,  September  10,  1912. 

The  original  subscription  agreement  was  then  ordered  filed 
with  the  records  of  the  company. 

§  804. 

The  meeting  then  proceeded  to  the  election  of  officers  by 
ballot,  to  serve  until  the  third  Tuesday  in  December,  1912. 
Mr.  White  was  appointed  teller  and  nominations  for  president, 
vice-president,  secretary  and  treasurer  having  been  made,  the 
teller  collected  the  ballots  and  reported  the  vote  of  the  meeting 
as  follows: 

For  president:  William  King — 3  votes. 

For  vice-president:  James  Smith — 3  votes. 

For  secretary :  Albert  Jones — 3  votes. 

For  treasurer — Albert  Jones — 3  votes. 

The  Chairman  declared  the  above  named  elected  to  the  said 
offices  respectively. 


§  805  COEPORATE  I'EOCEDURE.  560 

§  805. 

The  Chairman  then  reported  that  he  had  received  from  Mr. 
John  Edwards  an  offer  in  writing  to  assign,  transfer  and  con- 
vey his  entire  construction  business,  including  plant,  fixtures, 
machinery,  cash  and  stock  on  hand,  and  the  entire  assets 
thereof,  including  goodwill,  to  the  company  for  the  capital 
stock  subscribed  by  him,  amounting  to  495  shares  of  the  com- 
mon stock  and  500  shares  of  preferred  stock  of  the  company. 

The  said  offer  was  read  and  ordered  spread  upon  the 
minutes  of  the  meeting,  and  is  as  follows:  [Take  in  written 
offer.] 

Mr.  Edwards  was  thereupon  invited  into  the  meeting  and 
made  a  full  statement,  in  answer  to  questions  and  otherwise, 
as  to  the  value  of  his  said  business  and  plant. 

After  Mr.  Edwards  retired  the  trustees  had  a  prolonged  dis- 
cussion regarding  his  offer  and  the  value  of  his  plant  and 
construction  business,  and  thereafter,  on  motion  duly  made 
and  carried,  it  was  unanimously 

"Resolved,  that  in  the  opinion  of  the  trustees,  after  full 
investigation,  consideration  and  discussion,  the  plant  and  con- 
struction business  of  Mr.  John  Edward  is  fairly  and  conser- 
vatively valued  in  his  offer  to  the  company;  that  the  best 
interests  of  the  company  will  be  furthered  by  accepting  the 
offer,  and  therefore  be  it  further  resolved  that  the  offer  of  Mr. 
John  Edwards  to  transfer  his  entire  construction  business, 
plant  and  goodwill  to  the  company  be  and  the  same  is  hereby 
accepted;  and  be  it  further  resolved  that  on  receiving  from 
Mr.  Edwards  an  assignment,  transfer  and  conveyance  of  his 
construction  business,  plant,  assets  and  goodwill,  examined  by 
and  approved  by  counsel  for  the  company,  the  proper  officers 
be  and  they  are  hereby  authorized  and  directed  to  issue  to  Mr. 
Edwards  and  his  appointees  500  shares  of  the  preferred  and 
495  shares  of  the  common  stock  of  the  company." 

On.  motion  duly  made  and  carried,  the  meeting  adjourned. 

• > 

Secretary. 


561 


FORMS. 


§806 


§  806. 

STATEMENT  OF  OFFICERS  OF  KING  COUNTY 
CONSTRUCTION  COMPANY. 

King  County  Construction  Company,  a  corporation  organ- 
ized and  existing  under  the  laws  of  Washington,  in  compli- 
ance therewith  makes  and  files  this  statement  containing  the 
following  list  of  all  of  its  officers  and  their  respective  titles 
of  office,  names  and  addresses,  and  the  term  of  office  for  which 
they  have  been  chosen : 


Name. 


President:   William  King 


Vice-President:  James    Smith 


Secretary:  Albert  Jones 


Treasurer:  Albert  Jones 


Address. 


No.  1  Avenue  C, 

Seattle,    Wash. 

No.  1  Avenue  A, 
Seattle,  Wash. 

No.  1  Avenue  B, 
Seattle,  Wash. 

No.  1  Avenue  B, 
Seattle,  Wash. 


Term  of  Office. 


Until  Third  Tues- 
day in  December, 
1912. 

Until  Third  Tues- 
day in  December, 
1912. 

Until  Third  Tues- 
day in  December, 
1912. 

Until  Third  Tues- 
day in  December, 
1912. 


In  witness  whereof  the  company  has  executed  this  statement 
in  its  corporate  name,  sealed  with  its  corporate  seal,  attested 
by  its  secretary,  and  sworn  to  by  its  president,  this  15th  day 
of  September,  1912. 

KING  COUNTY  CONSTRUCTION  COMPANY. 

By  WILLIAM  KING, 

President. 
[Corporate  Seal]  Attest:  ALBERT  JONES, 

Secretary. 

State  of  Washington, 
County  of  King, — ss. 

William  King,  first  being  duly  sworn,  deposes  and  says  that 

he  is  the  president  of  King  County  Construction  Company, 

and  that  the  foregoing  annexed  statement  contains  a  true  and 

complete  list  of  all  the  officers  of  said  company  and  their  re- 

36 


§§  807,  808         CORPORATE  PROCEDURE.  562 

spective  titles  of  office,  names  and  addresses  and  the  term  of 
office  for  which  they  have  been  chosen. 

[Signed]     WILLIAM  KING. 

Subscribed  and  sworn  to  before  me,  a  notary  public  in 
and  for  King  County,  State  of  Washington,  residing  at 
1616  E.  Howell  St.,  Seattle. 

[Notarial  Seal]  JOSEPH  WHITE. 

§  807. 

NOTICE    OF    CHANGE    OF   NAME    OF   ELECTRICAL 
CONSTEUCTION  COMPANY 

Formerly 

KING  COUNTY  CONSTRUCTION  COMPANTT. 

The  undersigned,  William  King,  president  of  Electrical 
Construction  Company,  signs  this  written  notice  to  be  filed 
by  the  company  in  compliance  with  the  laws  of  the  state  of 
Washington,  setting  forth  as  follows: 

I.  The  former  corporate  name  of  the  company  was  King 
County  Construction  Company. 

II.  The  corporate  name  of  the  company  as  changed  is  Elec- 
trical Construction  Company. 

III.  Supplemental  articles  making  such  change  of  name 
have  been  filed  in  the  office  of  the  Secretary  of  State  and  in 
the  office  of  the  county  auditor  of  King  County,  Washington. 

In  witness  whereof  I  have  hereunto  set  my  hand  and  seal 
this  28th  day  of  September,  1912. 

WILLIAM  KING, 

President. 

§  808. 

SUPPLEMENTAL  ARTICLES  OF  INCORPORATION  OF 
KING  COUNTY  CONSTRUCTION  COMPANY. 

The  King  County  Construction  Company  being  desirous  of 
changing  its  said  name  to  be  hereafter  Electrical  Construction 
Company,  in  conformity  with  the  laws  of  the  state  of  Wash- 


563  FORMS.  §  808 

ington,  makes  and  executes  these  Supplemental  Articles  of 
Incorporation,  and  certifies  as  follows : 

ARTICLE  I. 

The  name  of  the  corporation  is  hereby  changed  from  its 
former  name,  King  County  Construction  Company,  and  shall 
hereafter  be 

Electrical  Construction  Company. 

ARTICLE  II. 
The  corporate  seal  of  the  company  shall  be  changed  to  con- 
form to  the  newly  adopted  name. 

In  witness  whereof  the  company  has  caused  these  presents 
to  be  executed  and  filed  in  its  former  corporate  name  by  its 
president  and  its  former  corporate  seal  to  be  hereto  affixed  and 
attested  by  its  secretary,  this  20th  day  of  September,  1912. 
[Corporate  Seal] 

KING  COUNTY  CONSTRUCTION  COMPANY, 

Per  WILLIAM  KING, 

President. 
Attest:  ALBERT  JONES, 

Secretary. 

State  of  Washington, 
County  of  King. 

On  this  20th  day  of  September,  1912,  before  me  personally 
appeared  William  King,  to  me  known  to  be  the  president  of 
the  corporation  that  executed  the  within  and  foregoing  instru- 
ment, and  acknowledged  the  said  instrument  to  be  the  free 
and  voluntary  act  and  deed  of  said  corporation  for  the  uses 
and  purposes  therein  mentioned,  and  on  oath  stated  that  he 
was  authorized  to  execute  said  instrument,  and  that  the  seal 
affixed  is  the  corporate  seal  of  said  corporation. 

In  witness  whereof  I  have  hereunto  set  my  hand  and  affixed 
my  official  seal  the  day  and  year  first  above  written. 

JOSEPH  WHITE, 
Notary  Public  in  and  for  the  State  of  Washington,  Residing 
at  1616  E.  Howell  St.,  Seattle,  Wash. 


§  809  CORPORATE  PROCEDURE.  564 

§  809. 

CERTIFICATE  OF  INCREASE  [OR  REDUCTION]  OF 
THE  CAPITAL  STOCK  OF  KING  COUNTY  CON- 
STRUCTION COMPANY. 

"We,  the  undersigned,  William  King,  Chairman,  and  James 
Smith,  Secretary,  respectively,  of  a  special  meeting  of  the 
stockholders  of  King  County  Construction  Company,  a  cor- 
poration organized  and  existing  under  the  laws  of  the  state 
of  Washington,  held  for  the  purpose  of  increasing  the  capital 
stock  of  the  company,  do  make,  sign  and  verify  this  certificate 
of  the  proceedings,  showing  a  compliance  with  the  laws  of 
Washington,  as  follows : 

That  prior  to  such  meeting  a  notice  specifying  the  object  of 
the  meeting,  the  place  where  it  was  to  be  held,  and  the  amount 
to  which  it  was  proposed  to  increase  the  capital,  signed  by  at 
least  a  majority  of  the  trustees  of  the  company,  was  published 
once  a  week  for  at  least  eight  weeks  in  the  "Seattle  Daily 
Bulletin,"  a  newspaper  published  in  King  County,  where  the 
principal  place  of  business  of  the  company  is  located. 

That  the  following  is  a  true  copy  of  said  notice : 

NOTICE  TO  STOCKHOLDERS. 

Seattle,  Washington,  Sept.  25,  1912. 
■A  special  meeting  of  the  stockholders  of  King  County  Con- 
struction Company  will  be  held  on  the  twelfth  day  of  Decem- 
ber, 1912,  at  11  o'clock  A.  M.,  at  the  office  of  said  company, 
at  No.  100  Second  Avenue,  Seattle,  Washington,  for  the  pur- 
pose of  voting  upon  a  proposition  to  increase  the  capital  stock 
of  the  company  from  $100,000,  consisting  of  1,000  shares  of 
the  par  value  of  $100  each,  to  $150,000,  consisting  of  1,500 
shares  of  the  par  value  of  $100  each. 

WILLIAM  KING, 
JAMES  SMITH, 
ALBERT  JONES, 
Trustees  of  King  County  Construction  Company. 

That  a  copy  of  such  notice  was  also  duly  mailed  to  each 
gtockholder  at  least  ten  days  before  the  date  specified  for  said 


565  FORMS.  §  809 

meeting,  addressed  to  him  at  his  place  of  business  or  residence 
as  the  same  appears  in  the  list  of  addresses  kept  by  the  secre- 
tary of  the  company. 

That  at  the  time  and  place  specified  in  said  notice,  stock- 
holders of  the  company  appeared  in  person  or  by  proxy,  repre- 
senting at  least  tM'o-thirds  of  all  the  shares  of  the  stock  of  the 
company,  and  organized  said  meeting  by  choosing  from  their 
number  the  undersigned,  William  King,  as  chairman  and  the 
undersigned,  James  Smith,  as  secretary  thereof. 

That  the  notice  of  the  meeting  and  proof  of  the  proper  pub- 
lishing and  mailing  thereof  was  presented  and  read  and 
ordered  spread  upon  the  minutes  of  the  meeting. 

That  upon  motion  duly  made  and  seconded  a  vote  of  the 
stockholders  present  in  person  or  by  proxy  was  then  taken 
upon  the  following  resolution : 

Resolved,  that  the  capital  stock  of  King  County  Construc- 
tion Company  be  increased  from  the  present  amount  thereof, 
to  wit:  One  hundred  thousand  dollars  ($100,000),  consisting 
of  one  thousand  (1,000)  shares  of  the  par  value  of  one  hun- 
dred dollars  ($100)  each,  to  one  hundred  and  fifty  thousand 
dollars  ($150,000),  to  consist  of  fifteen  hundred  (1,500)  shares 
of  the  par  value  of  one  hundred  dollars  ($100)  each;  and  be 
it  further 

Resolved,  that  the  chairman  and  secretary  of  this  meet- 
ing be  and  they  are  hereby  authorized  and  directed  to  make, 
sign  and  verify  the  certificates  of  the  proceeding,  showing 
compliance  with  the  provisions  of  the  laws  of  Washington, 
certified  to  by  a  majority  of  the  trustees  of  the  company,  and 
cause  one  of  such  certificates  to  be  filed  in  the  office  of  the 
Secretary  of  State  and  another  in  the  office  of  the  county  au- 
ditor of  King  County,  Washington,  the  county  in  which  the 
principal  place  of  business  of  the  company  is  located,  and  to 
do  all  acts  and  things  that  may  be  necessary  or  proper  to 
comply  with  the  provisions  of  law  applicable  to  and  regulating 
such  increase  of  capital  stock. 

That  stockholders  of  the  company  representing  seven  hun- 
dred and  sixty-five  (765)  shares  of  stock,  being  in  excess  of 
two-thirds  of  all  the  shares  of  the  stock  of  the  company,  voted 


§  809  CORPORATE  PROCEDURE.  566 

in  favor  of  said  resolutions ;  and  stockholders  representing 
seventy-five  shares  of  the  stock  of  the  company  voted  against 
said  resolutions. 

That  a  sufficient  number  of  the  shares  of  stock  of  the  com- 
pany having  been  voted  in  favor  of  such  increase,  said  resolu- 
tions were  declared  duly  adopted. 

That  the  amount  of  capital  of  the  company  actually  paid 
in  is  one  hundred  thousand  dollars  ($100,000). 

That  the  whole  amount  of  the  debts  and  liabilities  of  the 
company  is  forty  thousand  dollars  ($40,000). 

That  the  amount  to  which  the  capital  stock  is  to  be  increased 
is  one  hundred  and  fifty  thousand  dollars  ($150,000),  consist- 
ing of  fifteen  hundred  (1,500)  shares  of  the  par  value  of  one 
hundred  dollars  ($100)  each. 

In  witness  whereof  we  have  made,  signed  and  verified  this 
certificate,  certified  to  by  a  majority  of  the  trustees  all  in 
triplicate,  this  15th  day  of  December,  1912. 

WILLIAM  KING, 

Chairman. 
JAMES   SMITH, 

Secretary. 

State  of  Washington, 
County  of  King, — ss. 

William  King  and  James  Smith,  being  first  severally  duly 
sworn,  on  their  oaths  do  depose  and  say,  and  each  for  himself 
deposes  and  says,  that  he,  the  said  William  King,  acted  as 
chairman  and  he,  the  said  James  Smith,  acted  as  secretary  of 
said  meeting  of  stockholders  of  King  County  Construction 
Company,  held  at  100  Second  Avenue,  Seattle,  Washington, 
on  the  twelfth  day  of  December,  1912;  that  he  signed  said 
foregoing  certificate ;  that  he  has  read  said  certificate  and 
knows  its  contents,  and  that  the  same  are  true. 

WILLIAM  KING, 

Chairman. 
JAMES  SMITH, 

Secretary. 


567  FORMS.  §  810 

Sworn  to  before  me  this  fifteenth  day  of  December.  1912. 
[Notarial  Seal]  JOSEPH  WHITE, 

Notary  Public  in  and  for  the  State  of  Washino^ton,  King 
County,  Residing  at  1616  E.  Howell  St.,  Seattle,  Wash- 
ington. 

§  810.  CERTIFICATE  OF  TRUSTEES. 

We,  the  undersigned,  hereby  certify  that  we  are  a  ma.iority 
of  the  trustees  of  King  County  Construction  Company ;  that 
from  the  beginning  we  have  been  cognizant  of  the  proceedings 
of  the  said  company  to  increase  its  capital  stock  ;  that  we  have 
read  the  foregoing  annexed  certificate  of  proceedings  and 
know  the  contents  thereof,  and  that  the  same  are  true,  and 
that  said  certificate  is  made,  signed  and  verified  by  the  per- 
sons who  acted  as  chairman  and  secretary,  respectively,  of 
said  meeting  of  stockholders  of  said  company. 

Witness  our  hands  and  seals  this  fifteenth  day  of  September, 
1912. 

WILLIAM   KING,     [Seal] 
ALBERT  JONES,      [Seal] 
JAMES  SMITH,        [Seal] 
Trustees. 

State  of  Washington, 
County  of  King, — ss. 

I,  Joseph  White,  a  notary  public  in  and  for  the  state  of 
Washington,  duly  commissioned  and  qualified,  do  hereby  cer- 
tify that  on  this  fifteenth  day  of  December,  1912,  before  me 
personally  appeared  William  King,  Albert  Jones  and  James 
Smith,  to  me  known  to  be  the  individuals  described  in  and 
who  executed  the  within  instrument,  and  acknowledged  that 
they  signed  and  sealed  the  same  as  their  free  and  voluntary 
act  and  deed  and  for  the  uses  and  purposes  therein  mentioned. 

Given  under  my  hand  and  official  seal  this  fifteenth  day  of 

December,  1912. 

JOSEPH  WHITE, 

Notary  Public. 


§§  811,  812         CORPORATE  PROCEDURE.  568 

§  811. 

APPOINTMENT  OF  AGENT  BY  FOREIGN  CORPORA- 
TION. 

Pursuant  to  the  provisions  and  requirements  of  the  laws  of 
the  state  of  Washington,  Ohio  Construction  Company,  a  cor- 
poration incorporated  under  the  laws  of  the  state  of  Ohio,  for 
construction  and  other  purposes  for  which  domestic  corpora- 
tions are  authorized  to  be  formed  by  the  laws  of  the  state  of 
Washington,  hereby  appoints  an  agent  residing  at  the  place 
in  the  state  where  the  principal  business  of  the  corporation  is 
to  be  carried  on ,  designated  as  follows : 

I.  The  name  of  the  agent  is  George  Adams. 

II.  The  place  of  residence  of  said  agent  is  140  Avenue  B, 
Tacoma,  Washington. 

III.  The  place  where  the  principal  business  of  such  cor- 
poration is  to  be  carried  on  is  No.  105  Cherry  Street,  Tacoma, 
Washington,  at  which  place  said  agent  has  his  office. 

IV.  Said  agent  is  hereby  authorized  to  accept  service  of 
process  in  any  action  or  suit  pertaining  to  the  property,  busi- 
ness or  transactions  of  such  corporation  within  this  state  in 
which  such  corporation  may  be  a  party. 

In  witness  whereof,  Ohio  Construction  Company  has  caused 
these  presents  to  be  signed  by  its  president  and  attested  by  its 
corporate  seal  this  twentieth  day  of  September,  1912. 

[Corporate  Seal]  GEORGE  H.  McKINLEY, 

President  of  Ohio  Construction  Company. 

§  812.         PROXY  [POWER  OF  ATTORNEY]. 

Know  all  men  by  these  presents,  that  I,  William  King,  do 
hereby  constitute  and  appoint  Joseph  White  to  be  my  lawful 
attorney,  substitute  and  proxy  in  my  name,  place  and  stead, 
to  vote  upon  all  stock  held  by  me  in  King  County  Construc- 
tion Company  at  the  annual  meeting  of  stockholders  of  said 
corporation  to  be  held  on  the  third  Tuesday  in  December, 
1912  (or  special  meeting  designated),  and  at  any  adjourned 
meeting  thereof,  as  fully  and  with  the  same  effect  upon  all 
matters  and  to  all  intents  and  purposes  as  I  might  or  could 


569 


FORMS. 


§813 


do  were  I  personally  present  at  such  meeting;  and  I  hereby 
revoke  any  proxy  or  proxies  heretofore  given  by  me  to  any 
person  or  persons  whatsoever. 

In  witness  whereof  I  have  hereunto  set  my  hand  and  seal 
this  tenth  day  of  December,  1912. 


In  presence  of 


§  813. 

ARTICLES  OF  INCORPORATION  OF  SPOKANE  SAY- 
INGS AND  LOAN  SOCIETY  [ASSOCIATION]. 
"We,  the  undersigned  citizens  of  the  state  of  Washington, 
desiring  to  form  a  savings  and  loan  society  [association]  for 
the  purpose  of  accumulating  the  savings  and  funds  of  its 
members  and  lending  its  shareholders  or  others  the  funds  so 
accumulated,  do  make,  acknowledge  and  file  Articles  of  In- 
corporation specifying : 

(a)  The  name  of  the  proposed  association  shall  be  Spokane 
Savings  and  Loan  Society. 

(b)  The  city  and  county  wherein  the  principal  place  of 
business  of  the  association  is  to  be  located  are  the  city  of 
Spokane,  County  of  Spokane,  within  the  state  of  Washington. 

(c)  The  number  of  its  directors  shall  be  nine.  The  first 
board  of  directors  shall  hold  office  for  a  term  of  three  months 
from  the  time  said  association  is  authorized  to  do  business. 

(d)  The  names,  occupation  and  postoffice  addresses  of  its 
first  directors  are: 


Names. 

Occupation. 

John  Smith. 

Real  Estate  Ag«nt. 

George  Jones, 

Doctor. 

William  Smith, 

Farmer. 

Henry  Jones, 

Salesman, 

Robert  Allen. 

Physician. 

Joseph  Allen.. 

Druggist. 

John  Bailey. 

Grocer. 

William   Manley. 

L/awyer. 

Joseph   Manley. 

Banker. 

Postoffice  Addresses. 


No.  10 
No.  11 
No.  12 
No.  13 
No.  14 
No.  15 
No.  16 
No.  17 
No.  18 


Pacific  Ave., 
Pacific  Av«., 
Pacific  Ave., 
Pacific  Ave., 
Atlantic  Ave 
Atlantic  Ave 
Atlantic  Ave 
Atlantic  Ave 
At  Isn't  ic  .Ave 


Spokane,  Wash. 
Spokane,  Wash. 
Spokane,  Wash. 
Spokane,  Wash. 
.,  Spokane,  Wash. 
.,  Spokane,  Wash. 
,  Spokane,  Wash. 
,  Spokane,  Wash. 
.,  Spokane,  Wash. 


(e)   The  names,  occupation  and  postoffice  addrasses  of  the 
subscribers  to  the  Articles  of  Incorporation  and  the  number 


§813 


CORPORATE   PROCEDURE. 


570 


of  shares  which  each  has  agreed  to  take,  the  matured  value 
of  which  shares  so  subscribed  shall  be  $25,000,  are 


Namea. 

Occupation. 

PostofiSce  Addresses. 

Shares. 

John  Smith. 

Real  Estate  Agent. 

No.  10  Pacific  Ave.,  Spokane,  Wash. 

25 

George  Jones, 

Doctor. 

No.  11  Pacific  Ave.,  Spokane,  Wash. 

35 

William   Smith. 

Farmer. 

No.  12  Pacific  Ave.,  Spokane,  Wash. 

15 

Henry  Jones, 

Salesman. 

No.  13  Pacific  Ave.,  Spokane,  Wash. 

25 

Robert  Allen. 

Physician, 

No.  14  Atlantic  Ave.,  Spokane,  Wash. 

45 

Joseph  Allen. 

Druggist. 

No.  15  Atlantic  Ave.,  Spokane,  Wash. 

20 

John  Bailey. 

Grocer. 

No.  16  Atlantic  Ave.,  Spokane,  Wash. 

15 

William   Manley. 

Dawyer. 

No.  17  Atlantic  Ave.,  Spokane,  Wash. 

20 

Josreph  Manley. 

Banker. 

No.  18  Atlantic  Ave.,  Spokane,  Wash. 

25 

Geor^  Allen. 

Grocer. 

No.  19  Pacific  Ave.,  Spokane,  Wasih. 

25 

(f)  The  limit  of  capital  to  be  accumulated  shall  be 
$2,500,000. 

(g)  The  time  of  duration  of  said  association  shall  be  fifty 
years. 

In  witness  whereof  we  have  hereunto  set  our  hands  and 
seals  this  fifteenth  day  of  April,  1913. 

JOHN  SMITH.  [Seal 

GEORGE   JONES.  [Seal 

WILLIAM  SMITH.  [Seal 

HENRY  JONES.  [Seal 

ROBERT  ALLEN.  [Seal 

JOSEPH  ALLEN.  [Seal 

•JOHN  BAILEY.  [Seal 

WILLIAM  MANLEY.  [Seal 
JOSEPH  MANLEY.  [Seal 
GEORGE  ALLEN.  [Seal 

State  of  Washington, 
County  of  Spokane, — ss. 

I,  Joseph  White,  a  notary  public  in  and  for  the  state  of 
Washington,  duly  commissioned,  sworn  and  qualified,  do 
hereby  certify  that  on  this  fifteenth  day  of  April,  1913,  be- 
fore me  personally  appeared  John  Smith,  George  Jones,  Will- 
iam Smith,  Henry  Jones,  Robert  Allen,  Joseph  Allen,  John 
Bailey,  William  Manley,  Joseph  Manley  and  George  Allen, 
to  me  known  to  be  the  individuals  described  in  and  who  exe- 
cuted the  within  instrument  and  acknowledged   that   they 


571 


FORMS. 


§814 


signed  and  sealed  the  same  as  their  free  and  voluntary  act 
and  deed  and  for  the  uses  and  purposes  therein  mentioned. 
Given  under  my  hand  and  official  seal  this  fifteenth  day  of 
April,  1913. 

[Notarial  Seal]  JOSEPH  WHITE, 

Notary  Public,  No.  1616  East  Howell  St.,  Seattle,  "Wash. 

§  814. 

CERTIFICATE   OF   ORGANIZATION  OF  TACOMA 
TRUST  COMPANY. 

"We,  the  undersigned,  being  seven  persons  of  full  age,  de- 
sirous of  becoming  a  trust  company  on  the  terms  and  con- 
ditions and  subject  to  the  liabilities  prescribed  by  the  laws 
of  the  state  of  Washington,  do  execute  and  acknowledge  this 
organization  certificate  in  triplicate  and  do  specifically  state 
as  follows : 

(1)  The  name  by  which  the  corporation  shall  be  known  is 
Tacoma  Trust  Company. 

(2)  The  place  where  the  business  of  the  corporation  is  to 
be  transacted  is  Tacoma,  Washington. 

(3)  The  amount  of  the  capital  stock  of  the  corporation  is 
two  million  five  hundred  thousand  dollars  ($2,500,000),  and 
the  number  of  shares  into  which  the  same  is  to  be  divided  is 
twenty-five  thousand  (25,000). 

(4)  The  name,  residence  and  postoffice  address  of  each  mem- 
ber of  the  corporation  are 


Names. 

Eesidences. 

Postoffice  Addresses. 

John   Smith. 

No. 

100  5th  Ave., 
Tacoma, 

Wash. 

No.  100  5th  Ave., 

Tacoma,  Wash. 

Henry  Smith. 

No. 

45   South  St., 
Tacoma, 

Wash. 

P.  0.  Box  610, 

Tacoma,  Wash. 

James  Alder. 

No. 

62  North  St. 
Tacoma, 

Wash. 

No.  62  North  St., 

Tacoma,  Wash. 

Joseph  Alder. 

No. 

230  West  St., 
Tacoma, 

Wash. 

P.  0.  Box  1312, 

Tacoma,  Wash. 

Frank  Allen. 

No. 

34  Western  Ave., 
Tacoma,  Wash. 

P.  0.  Box  13&0, 

Tacoma,  Wash. 

James  Allen. 

No. 

39  South.  St 
Tacoma, 

Wash. 

No.  39  South  St., 

Tacoma,  Wash. 

John  Bailey. 

No. 

305  6th  Ave., 
Tacoma, 

Wash. 

P.  0.  Box  1410, 

Tacoma,  Wash. 

§  815  CORPORATE  PROCEDURE.  572 

(5)   The  term  of  the  existence  of  the  corporation  shall  be 

fifty  years. 

In  witness  whereof  we  have  hereunto  set  our  hands  and 

seals  this  eleventh  day  September,  A.  D.  1912. 

JOHN  SMITH.  [Seal] 

HENRY  SMITH.  [Seal] 
JAMES  ALDER.  [Seal] 
JOSEPH  ALDER.  [Seal] 
FRANK  ALLEN.  [Seal] 
JAMES  ALLEN.  [Seal] 
JOHN  BAILEY.        [Seal] 

State  of  Washington, 
County  of , — ss. 

I,  Joseph  White,  a  notary  public  in  and  for  the  state  of 
Washington,  duly  commissioned,  sworn  and  qualified,  do 
hereby  certify  that  on  this  eleventh  day  of  September,  A.  D. 
1912,  before  me  personally  appeared  John  Smith,  Henry 
Smith,  James  Alder,  Joseph  Alder,  Frank  Allen,  James  Allen, 
John  Bailey,  to  me  known  to  be  the  individuals  described  in 
and  who  executed  the  within  instrument  and  acknowledged 
that  they  signed  and  sealed  the  same  as  their  free  and  volun- 
tary act  and  deed  and  for  the  uses  and  purposes  therein  men- 
tioned. 

Given  under  my  hand  and  official  seal  this  eleventh  day  of 
September,  1912. 

[Notarial  Seal]  JOSEPH  WHITE, 

Notary  Public. 

§  815. 

ARTICLES  OF  INCORPORATION  OF  TRADERS'  BANK 
OF  COMMERCE. 

The  undersigned  being  desirous  of  becoming  incorporated 
for  the  purpose  of  conducting  and  carrying  on  a  general  bank- 
ing business,  do  execute  and  acknowledge  these  articles  speci- 
fying as  follows : 

1.  The  name  assumed  by  such  bank  shall  be  Traders'  Bank 
of  Commerce. 


573  FORMS.  §  815 

2.  The  county  and  city  where  such  bank  is  to  be  located  is 
the  county  of  King  and  the  city  of  Seattle. 

3.  The  nature  of  its  business  shall  be  that  of  a  commercial 
bank. 

4.  The  amount  of  its  capital  stock  which  shall  be  divided 
into  shares  of  one  hundred  dollars  each  shall  be  two  hundred 
and  fifty  thousand  dollars  ($250,000). 

5.  The  period  for  which  such  bank  is  organized  shall  be  fifty 
years. 

In  witness  whereof  we  have  hereunto  set  our  hands  and  seals 
this  fifteenth  day  of  September,  1912. 

ARTHUR  JONES.  [Seal] 
THOMAS  BENSON.  [Seal] 
WILLIAM  KING.  [Seal] 

State  of  Washington, 
County  of  King, — ss. 

I,  Joseph  White,  a  notary  public  in  and  for  the  state  of 
Washington,  duly  commissioned,  sworn  and  qualified,  do 
hereby  certify  that  on  this  fifteenth  day  of  September,  A.  D. 
1912,  before  me  personally  appeared  Arthur  Jones,  Thomas 
Benson  and  William  King,  to  me  known  to  be  the  individuals 
described  in  and  who  executed  the  within  instrument,  and 
acknowledged  that  they  signed  and  sealed  the  same  as  their 
free  and  voluntary  act  and  deed  and  for  the  uses  and  purposes 
therein  mentioned. 

Given  under  my  hand  and  official  seal  this  fifteenth  day  of 
September,  A.  D.  1912. 

[Notarial  Seal]    .  JOSEPH  WHITE, 

Notary  Public. 


§  816  CORPORATE  PROCEDURE.  574 

§  816. 

FORM  OF  CORPORATE  BOND  SECURED  BY 
MORTGAGE. 

UNITED  STATES  OF  AMERICA. 

State  of  

No $1,000 

CONSTRUCTION  COMPANY. 

First  Consolidated  Mortgage  Four  and  One-half  Per  Cent 
Twenty-Year  Gold  Bond. 

Construction  Company,  a  corporation  duly  organ- 
ized under  the  laws  of  the  state  of for  value  received, 

promises  to  pay  to  the  bearer  or,  if  this  bond  be  registered, 

then  to  the  registered  holder  hereof,  at  the  office  of 

trust  company,  in  the  city,  county  and  state  of one 

thousand  dollars  ($1,000)  in  good  coin  of  the  United  States 
of  America  of  the  present  standard  of  weight  and  fineness,  on 
the  twenty-second  day  of  January,  A.  D.  1923,  and  also  to  pay 
interest  on  said  principal  sum  from  the  twenty-second  day  of 
January,  1903,  semi-annually  in  like  coin,  at  the  rate  of  four 
and  one-half  per  centum  (4i/2%)  per  annum  on  the  twenty- 
second  days  of  July  and  January  in  each  year  on  presentation 
and  surrender  at  the  office  of  said  trust  company  of  the  inter- 
est coupons  hereto  annexed  as  the  same  become  due  respect- 
ively. 

This  bond  is  one  of  a  series  of  seven  thousand  five  hundred 
(7,500)  bonds  numbered  consecutively  from  1  to  7,500,  both 
numbers  inclusive,  all  of  like  date,  tenor  and  amount  and  all 
equally  secured  by  a  First  Consolidated  Mortgage  bearing 
even  date  herewith,  duly  executed  and  delivered  by  said 
Construction  Company  to  said Trust  Com- 
pany, as  trustee,  and  conveying  to  said  trustee  by  way  of 
mortgage  certain  lands  and  premises,  with  the  appurtenances, 
as  by  reference  to  said  mortgage  will  more  fully  and  at  large 
appear;  subject  to  the  terms,  conditions  and  provisions  of 
which  said  mortgage  this  bond  is  issued,  accepted  and  held. 


575  FORMS,  §  81G 

This  bond  may  be  registered  in  the  name  of  the  owner,  in 

the  manner  and  with  the  effect  provided  in  the  said  mortgage. 

This  bond  shall  not  be  obligatory  or  valid  for  any  purpose 

until  the  certificate  indorsed  hereon  is  signed  by  the  trustee 

under  said  mortgage. 

In  witness  whereof  said    Construction  Company 

has  caused  its  corporate  seal  to  be  hereunto  affixed  and  at- 
tested by  its  secretary  and  this  bond  to  be  signed  in  its 
corporate  name  by  its  president,  and  has  also  caused  the  fac- 
simile signature  of  its  treasurer  to  be  engraved  upon  the  an- 
nexed coupons,  all  this  twenty-second  day  of  January,  one 
thousand  nine  hundred  and  three. 

CONSTRUCTION  COMPANY, 

•       By    ..., 

President. 

Attest : , 

Secretary. 

(Coupon.) 
No $22.50 

Construction  Company  will  pay  to  the  bearer  on 

the  twenty-second  day  of ,  at  the  office  of 

Trust  Company,  in  the  city  of  ,  twenty-two  dollars 

and  fifty  cents  in  gold  coin  of  the  United  States  of  America, 
for  six  months'  interest  then  due  on  its  First  Consolidated 
Mortgage  gold  bond  No 

Coupon  No 


Treasurer. 
(Trustee's  Certificate.) 

Trust  Company  hereby  certifies  that  the  within 

bond  is  one  of  the  series  and  issue  of  bonds  described  in  the 
mortgage  therein  mentioned. 

Trust  Company, 

Trustee. 
By 


§§  817,  818         CORPORATE  PROCEDURE.  576 

§  817. 

NOTICE  OF  ANNUAL  MEETING  OF  STOCKHOLDERS 
OF  KING  COUNTY  CONSTRUCTION  COMPANY. 

Notice  is  hereby  given  that  the  annual  meeting  of  stock- 
holders of  King  County  Construction  Company  will  be  held 
at  the  office  of  the  company  at  No.  100  Second  Avenue, 
Seattle,  Washington,  on  the  seventeenth  day  of  December, 
1912,  at  10:30  o'clock  in  the  forenoon,  for  the  annual  election 
of  trustees  and  for  (insert  any  special  purpose),  and  for  the 
transaction  of  such  other  business  as  may  properly  come  before 
said  meeting. 

Dated  Seattle,  December  1,  1912. 

JAMES  SMITH, 
Secretary. 

§  818. 

NOTICE  OF  [ANNUAL,  REGULAR,  SPECIAL,  AS  THE 
CASE  MAY  BE]  MEETING  OF  THE  BOARD  OF 
TRUSTEES  OF  KING  COUNTY  CONSTRUCTION 
COMPANY. 

To  the  Trustees  of  King  County  Construction  Company : 

You  and  each  of  you  are  hereby  notified  that  a  (special, 
regular,  annual)  meeting  of  the  board  of  trustees  of  King 
County  Construction  Company  will  be  held  at  the  office  of 
the  company,  at  No.  100  Second  Avenue,  in  the  city  of  Seattle, 
King  County,  "Washington,  on  the  twentieth  day  of  Septem- 
ber, 1912,  for  the  purpose  of   ,  and  of  transacting 

such  other  business  as  may  come  before  the  meeting. 

Dated  at  Seattle,  Washington,  this  eleventh  day  of  Sep- 
tember, 1912. 

KING  COUNTY  CONSTRUCTION  COMPANY, 

[Corporate  Seal]  By , 

Secretary. 


577  FORMS.  §§819,820 

§  819. 

WAIVER  OF  NOTICE  OF  [ANNUAL,  REGULAR,  SPE- 
CIAL] MEETING  OF  BOARD  OF  DIRECTORS  OF 
KING  COUNTY  CONSTRUCTION  COMPANY. 

I, ,  trustee  of  King  County  Construction  Company, 

hereby  admit  due  and  timely  service  of  the  notice  of  which 
a  copy  is  hereto  annexed,  and  do  hereby  waive  notice  of  the 
meeting  therein  mentioned  and  the  lapse  of  any  prescribed 
period  of  time,  and  I  do  hereby  authorize  and  approve  the  acts 
of  the  trustees  at  such  meeting. 


Trustee. 
In  the  presence  of 


§  820. 

NOTICE  OF    REMOVAL  OF    PRINCIPAL    PLACE   OF 
BUSINESS    OF    KING    COUNTY    CONSTRUCTION 
COMPANY. 
To  Whom  It  May  Concern : 

Notice  is  hereby  given  that  on  the  thirtieth  day  of  Septem- 
ber, 1912,  the  principal  place  of  business  of  King  County  Con- 
struction Company  will  be  removed  from  100  Second  Ave., 
Seattle,  King  County,  Washington,  to  the  city  of  West  Seattle, 
King  County  (or  if  out  of  county  specify  city,  town  and 
county),  Washington. 

Dated  Seattle,  Washington,  September  12,  1912. 

KING  COUNTY  CONSTRUCTION  COMPANY, 
[Corporate  Seal]  By  JAMES  SMITH, 

Secretary. 
37 


§  821  CORPORATE  PROCEDURE.  578 

§  821. 

NOTICE  OF  ASSESSMENT  AND  SALE  OF  SHARES 
OF  STOCK  IN  KING  COUNTY  CONSTRUCTION 
COMPANY. 

To  John  Smith,  Henry  Jones,  William  Barnes,  George  King, 
and  Each  of  You,  Stockholders  in  King  County  Construc- 
tion Company. 

Notice  is  hereby  given  that  of  the  balance  of  $25  per  share 
still  unpaid  on  your  several  subscriptions  to  the  stock  of  the 
said  company,  the  trustees  of  the  company  do  hereby  make 
an  assessment  of  $15  per  share,  and  do  hereby  call  and  de- 
mand payment  from  each  of  you  of  $15  per  share  of  stock 
in  the  company  so  held  by  you  severally,  being  $150  on  the 
ten  shares  of  stock  so  held  by  John  Smith,  $225  on  the  15 
shares  of  stock  so  held  by  Henry  Jones,  $300  on  the  20  shares 
of  stock  so  held  by  William  Barnes,  and  $450  on  the  30  shares 
of  stock  so  held  by  George  King,  said  payment  and  payments 
to  be  made  to  the  company  at  its  office  on  or  before  October 
20,  ]912,  and  upon  default  or  failure  to  make  such  payments 
by  any  of  you,  so  many  of  said  shares  so  held  by  him  as  will 
be  necessary  for  the  payment  of  the  said  assessments  on  the 
shares  held  by  him  will  be  sold  at  public  auction  by  Robert 
Jenkins,  public  auctioneer,  on  the  front  steps  of  the  county 
courthouse,  at  Seattle,  Washington,  on  the  twenty-second  day 
of  October,  1912,  at  12  M.,  and  at  such  sale  the  person  who 
shall  pay  the  assessment  so  due  together  with  the  expenses  of 
advertising  and  sale  for  the  smallest  number  of  shares  or 
portion  of  a  share,  as  the  case  may  be,  shall  be  deemed  the 
highest  bidder. 

Dated  Seattle,  Washington,  September  11,  1912. 

WILLIAM  KING, 
JAMES  SMITH, 
ALBERT  JONES, 
Trustees. 


579  FORMS.  §  822 

§  822. 

PETITION  FOR  VOLUNTARY  DISSOLUTION. 

Superior  Court,  King  County,  Washington. 

In  the  Matter  of  the  Voluntary  Dissolution  ^ 
of    KING    COUNTY    CONSTRUC-    > 
TION  COMPANY.  J 

To    Hon ,  Judge  of   the    Superior    Court  of  King 

County : 

The  petition  of  King  County  Construction  Company  re- 
spectfully alleges  and  shows : 

That  your  petitioner,  its  trustees  and  officers,  have  discov- 
ered that  the  stock,  effects  and  other  property  of  it,  said  peti- 
tioner corporation,  are  not  sufficient  to  pay  all  just  demands 
for  which  it  is  liable,  or  to  afford  reasonable  security  to  those 
who  may  deal  with  it,  and  that  (state  any  special  reason), 
and  that  your  petitioner,  its  trustees  and  stockholders,  deem 
it  beneficial  to  the  interests  of  the  stockholders  that  the  said 
corporation   be   dissolved ; 

That  the  principal  place  of  business  of  said  corporation 
is  located  at  No.  100  Second  Avenue,  King  County,  Seattle; 

Wherefore  your  petitioner  prays  that  a  final  order  be  made 
and  entered  declaring  said  corporation  dissolved  and  that  a 
receiver  of  the  property  and  effects  of  said  corporation  be 
appointed,  and  for  such  other  and  further  relief  as  may  be 
proper. 

KING  COUNTY  CONSTRUCTION  COMPANY. 

[Corporate  Seal]  By  WILLIAM  KING, 

President. 

Attest:  JAMES  SMITH, 

Secretary. 

State  of  Washington, 
County  of  King, — ss, 

William  King,  being  first  duly  sworn,  on  his  oath  says  that 
he  is  the  president  of  King  County  Construction  Company; 
that  as  such  he  executed  the  foregoing  petition  in  the  name 
of  the  corporation  by  order  of  the  trustees  thereof;  that  he 


§§  823,  824         CORPORATE  PROCEDURE.  580 

has  read    said    foregoing    petition  and    knows  the  contents 
thereof,  and  that  the  same  are  true. 

WILLIAM  KING. 

Subscribed  and  sworn  to  before  me  this  tenth  day  of  Sep- 
tember,   1912. 

[Notarial  Seal]  JOSEPH  WHITE, 

Notary  Public  for  the  State  of  Washington. 

§  823.  CERTIFICATE  OF  OFFICERS. 

Superior  Court,  King  County,  Washington. 

In  the  Matter  of  the  Voluntary  Dissolution  ^ 
of    KING    COUNTY    CONSTRUC-    I 
TION  COMPANY.  J 

We,  the  undersigned  president  and  secretary  of  King 
County  Construction  Company,  hereby  certify  and  set  forth 
that  at  a  meeting  of  the  stockholders  of  the  said  corporation, 
called  for  the  purpose,  it  was  decided  by  a  vote  of  two-thirds 
of  all  the  stockholders  to  disincorporate  and  dissolve  the  cor- 
poration. 

Witness  our  hands  and  seals  this  tenth  day  of  September, 
1912. 

WILLIAM  KING, 

President. 
tlAMES  SMITH, 

Secretary. 
(Acknowledgment.) 

§  824. 

ARTICLES  OF  ASSOCIATION  OF  PACIFIC  CO- 
OPERATIVE LUMBER  COMPANY. 
We,  the  undersigned,  being  desirous  of  associating  our- 
selves together  as  a  co-operative  association  for  the  transac- 
tion of  the  business  hereinafter  specified  on  the  co-operative 
plan,  and  in  conformity  with  the  laws  of  the  state  of  Wash- 
ington, do  hereby  prepare  and  subscribe  articles  of  association 
setting  forth  as  follows: 


681  FORMS.  §  824 

1.  The  name  of  the  association  shall  be  Pacific  Co-operative 
Lumber  Company. 

2.  The  purpose  for  which  it  is  formed  is  [copy  form  791]. 

3.  Its  principal  place  of  business  shall  be  No.  200  Cherry 
street,  Seattle,  King  county,  state  of  Washington. 

4.  The  term  for  which  it  is  to  exist  shall  be  fifty  years. 

5.  The  amount  of  its  capital  stock  shall  be  one  million  dol- 
lars ($1,000,000),  consisting  of  ten  thousand  (10,000)  shares 
of  the  par  value  of  one  hundred  dollars  ($100)   each. 

In  witness  whereof  we  have  this  fourteenth  day  of  April, 
A.  D.  1913,  hereunto  set  our  hands  and  seals. 

JOHN  SMITH.  [Seal] 

ANDREW  JONES.      [Seal] 
GEORGE  KING.  [Seal] 

ALBERT  WOOD.       [Seal] 
ARTHUR  SMITH.      [Seal] 
Signed,  sealed  and  delivered  in  the  presence  of 

BENJAMIN  ALLEN. 
JOHN  WOOD. 

State  of  Washington, 
County  of  King, — ss. 

I,  Joseph  White,  a  notary  public  in  and  for  the  state  of 
Washington,  duly  commissioned,  sworn  and  qualified,  do  here- 
by certify  that  on  this  fourteenth  day  of  April,  1913,  per- 
sonally appeared  John  Smith,  Andrew  Jones,  George  King, 
Albert  Wood  and  Arthur  Smith,  to  me  known  to  be  the  in- 
dividuals described  in  and  who  executed  the  within  instru- 
ment, and  acknowledged  that  they  signed  and  sealed  the  same 
as  their  free  and  voluntary  act  and  deed  and  for  the  uses  and 
purposes  therein  mentioned. 

Given  under  my  hand  and  official  seal  this  fourteenth  day 
of  April,  1913. 

[Notarial  Seal]  JOSEPH  WHITE, 

Notary  Public. 


FEES  CHARGED  BY  SECRETARY  OF 
STATE. 


The  following  fees  will  be  charged  in  the  office  of  the  Secretary  of 
State  on  and  after  June  12,  1907,  and  must  be  paid  in  advance. 
COEPORATIONS,  INCLUDING  ALL  CORPORATIONS  REQUIRED 
TO  FILE  ARTICLES  WITH  THE  SECRETARY  OF  STATE, 
EXCEPTING  THOSE  ORGANIZED  FOR  RELIGIOUS,  SOCIAL, 
CHARITABLE  OR  EDUCATIONAL  PURPOSES.  (See  Laws 
1907,  Chapters  134  and  140.) 

•Filing  and  recording  Articles  of  Incorporation $25  00 

•Filing  and  recording  Amendatory  or  Supplemental  Articles.   10  00 
•Filing  and  recording  Certificate  or  Increase  of  Decrease  or 

Capital  Stock  10  00 

Filing  and  recording  Appointment  or  Revocation  of  Appoint- 
ment OF  Resident  Agent  of  foreign  corporation 5  00 

•CJertified  Copy  of  articles  of  incorporation 5  00 

Certified  Copy  amendatory  or  supplemental  articles 5  00 

Certified  Copy  of  certificate  of  increase  or  decrease  of  capital 

stock 5  00 

Certified  Copy  of  certificate  of  appointment   or    revocation    of 

appointment  of  resident  agent 5  00 

Duplicate  license    25 

Penalty  for  nonpayment  of  license  fee  prior  to  July  1st,  in  ad- 
vance         2  50 

Reinstatement  penalty,  corporations  four  years  delinquent 100  00 

Reinstatement  penalty,  less  than  four  years,  per  annum 2'0  00 

Filing  and  recording  notice  of  dissolution 5  00 

Annual  Corporation  License  fee  (payable  in  advance  on  or  be- 
fore July  1st  of  each  year) 15  00 

Furnishing  and  certifying  to  a  printed  compilation  of  the  Cor- 
poration Laws   5  00 

Resolution  to  extend  branch  lines  of  railways,  etc.,  $5.00  and 

15^  per  folio  for  filing  and  recording. 
For  certified  copy  of  such  resolutions,  $2  and  15^  per  folio. 

RELIGIOUS,   SOCIAL,    CHARITABLE    AND  EDUCATIONAL   OR- 
GANIZATIONS. 
Filing  and  recording  articles  of  religious,  educational,  social  and 

charitable  corporations   $5  00 

Filing  and  recording  articles  of  agreement  of  Social,  Charitable 
and    Educational    Associations    (eleemosynary    incorpora- 

*Wh€never  the  articles  exceed  twenty  folios  there  shaJl  be  an  ad- 
ditional charge  of  lo<^  per  folio  for  all  extra  folios  in  excess  of  the  first 
twenty. 

(583) 


584  FEES   CHARGED  BY  SECRETARY  OF  STATE. 

EELIGIOUS,   SOCIAL,   CHAEITABLE    AND    EDUCATIONAL   OK- 

GANIZATIONS— Continued : 

tions),  including  certififd  copy  of  certificate  for  filing  with 

county  auditor  (Law  of  1895) $7  45 

Filing  and  recording  amendment  or  amendments 5  OO 

Filing  and  recording  notice  of  dissolution 5  00 

MISCELLANEOUS. 
Filing  Boom  Plat 5  00 

Filing  and  recording  Trademark 5  00 

Filing  Order  of  Board  of  County  Commissioners  incorporating 

cities   and  towns    5  00 

For  Any  Certificate  Under  Seal  of  State 2  00 

For  filing  and  recording  articles  of  Cemetery  Associations  ....     5  00 
For  recording  miscellaneous  records,  papers  or  other  documents, 

10^  per  folio  and  $5  for  filing  in  each  case. 
For  copy  of  any  law,  record  or  other  document  or  paper,  15^  per 

folio  and  certificate  of  $2  in  addition. 

Note. — Postage  stamps  will  not  be  accepted  in  payment  of  any  of  the 
above  fees. 

Note. — All  fees  miist  he  paid  in  advance.  Original  articles  offered 
for  filing  must  be  accompanied  by  filing  and  recording  fee  of  $25.00,  as 
also  annual  license  fee  of  $15.00.  The  fiscal  year  ends  on  June  30th, 
on  which  date  all  corporation  licences  expire,  no  m,atter  on  what  date 
issued.  Fractional  years  are  not  recognized  in  the  payment  of  license 
fees.  Thus,  a  company  filing  articles  on  June  let,  must  pay  the  fuU 
license  fee  of  $15.00  at  the  time  of  filing,  and  the  license  fee  for  the 
succeeding  year  must  be  paid  before  July  1st,  otherwise  a  penalty  of 
$2.50  is  added. 


ALPHABETICAL  INDEX. 


[References  are  to  Sections.      S'y    equals  "Summary";   Stat,   equals   "S'tatutei"; 
Pr.  equals  "Procedure."] 

Abuse  of  Powers  and  Ultra  Vires  Acts. 

Distinction,  S'y  82. 

Acceptance. 

Of  charter,  S'y  34. 

Of  charter  creation  of  corporation,  S'y  34. 

No  corporation  until,  S'y  34. 

Accountability. 

Of  directors  and  trustees,  S'y  163. 
Acknowledgment: 

Corporate — Form,  Stat.  451. 
Of  certificate,  S'y  18. 

Acquiring  Property. 

By  corporations,  S'y  47. 
Acquisition  of  Land. 

For  unauthorized  purposes,  S'y  51. 
Acting  as  corporation,  S'y  19. 

Action. 

Of  tort  against  foreign  corporation,  S'y  232. 
On  unexecuted  contracts  unauthorized,  S'y  70. 
On  ultra  vires  contracts,  S'y  62. 

Actions. 

Of  foreign  corporations,  S  'y  222. 
Acts  of  Incorporation,  S'y  33. 

Adoption. 

Of  by-laws  in  organization,  S'y  5. 

Ad  Valorem  Assessment. 

In  condemnation,  S'y  265. 

(585) 


586  ALPHABETICAL    INDEX. 

[References  are  to  Sections.      S'y    equals  "Summary";   Stat,   equali   "Statutesf'; 
Pr.  equals  "Procedure."] 

Affidavit  Attached  to  Certificate,  S'y  18. 
Of  good  faith,  S'y  18. 

Required  on  certificate  of  incorporation,  S'y  18. 
To  construct  road,  S'y  19. 

Agent. 

Authority  of  implied,  S'y  44. 

Agents. 

Of  corporation,  acts  by,  S  'y  42. 
Of  foreign  corporations,  S'y  229. 

Foreign  corporation: 

Failure  of,  to  comply  with  law,  Stat.  423. 
Power  of,  implied,  S'y  44. 
Trustees  are,  S'y  155. 

Alteration  of  Charter,  S'y  35. 

Amendment  of  Charter,  S'y  33,  35. 

Amount  Devised  to  Corporation  Limited,  S'y  54. 

Appointment  of  Receivers,  S  'y  188. 

Apportionment  of  Assessment,  S'y  264. 

Appraisement  in  Condemnation,  S'y  301. 

ARTICLES  OF  INCORPORATION. 

Articles  of  incorporation,  Pr.  763. 

Articles  of  incorporation — General  form,  Pr.  797. 

Articles  can  assume  no  powers  beyond  statute,  S'y  46. 

Articles  must  be  filed,  S'y  7. 

Amendment  of,  by  banks,  Stat.  621. 

Bank  form,  Pr.  815. 

Building  and  loan  association — Form,  Pr.  813. 

Copy  of,  as  evidence,  Stat.  405. 

Corporations  formed  for  purposes  other  than  profit,  Stat. 

663. 
Fee  for  filing,  Stat.  714. 
For  general  corporations,  Stat.  752. 


ALPHABETICAL    INDEX.  587 

[References  are  to  Sections.      S'y    equals  "Summary";    Stat,   equals   "Statute*"; 
Pr.  equals   "Procedure."] 

ARTICLES  OF  INCORPORATION  (Continued). 
Pee  for  furnishing  certified  copies,  Stat.  717. 
Filing  of,  by  banks,  Stat.  614. 
Of  banks,  what  to  contain,  Stat.  613. 
Powers  enumerated  are  limit  of  corporate  power,  S'y  46, 
Religious,  etc.,  associations,  Stat.  677. 
Secret  societies — Where  to  be  filed,  Stat.  679. 
Supplemental — Statement  to  be  filed,  Stat.  430. 
Supplemental  or  amendatory — Fee  for  filing,  Stat.  715. 
Trust  company — Form,  Pr.  814. 

Validating  defective,  of  religious,  etc.,  associations,  Stat. 
685. 

Artificial  Being. 

Corporation  is,  S'y  1. 

Ascertainment  of  Value  iji  Condemnation. 

Character  of  proceedings,  S'y  310. 

ASSESSMENTS. 

As  for  public  use,  S'y  261, 
Notice  of,  how  given,  Stat.  414. 
Proportioned  to  benefits,  S'y  265, 
Taking  of  private  property,  S'y  287. 

Associates  After  Organization,  S'y  7. 
Not  to  include  subscribers,  S'y  7. 

Association, 

Meaning  of,  S'y  7. 

Assumption. 

Of  corporate  powers,  S'y  20. 

Of  powers  in  articles  of  incorporation,  S'y  46. 

Attack  on  De  Facto  Corporation  Only  by  State,  S'y  20. 

ATTORNEY  GENERAL. 

Proceedings  against  building,  loan  and  saving  associa- 
tions, Stat.  569. 


588  ALPHABETICAL    INDEX. 

[References  are  to  Sections.      S'y    equals  "Summary";   Stat,   eqaali   "Statxit«y; 
Pr.  equals  "Procedure."] 

Authority  of  Officers. 

How  shown,  S'y  160,  161. 

Award. 

In  condemnation  not  a  contract,  S'y  311. 
Of  commissioners  in  condemnation,  S'y  305. 

"Banking"  and  "Branch  Bank,"  Stat.  610. 
Provisions  affect  all  companies,  Stat.  611. 

Banking  Names. 

Use  prohibited,  Stat.  634. 
Unauthorized  use,  Stat.  634a. 

BANKS. 

Amendment  of  articles,  Stat.  621. 

Amount  of  funds  to  be  kept  on  hand,  Stat.  637. 

Articles  of  incorporation,  what  to  contain,  Stat.  613. 

Articles  of  incorporation — Form,  Pr.  815. 

Attorney  general  to  act,  when,  Stat.  653. 

"Banking,"  and  "branch  bank"  defined,  Stat.  610. 

Capital  required,  amount  of,  Stat.  612. 

Capital  stock,  payment  of,  Stat.  616. 

Capital  stock  required — Foreign  bank,  Stat.  660. 

Certified  checks,  when  issued,  Stat.  630. 

Charter  rights,  S'y  37. 

Combining  savings  and  commercial  business,  Stat.  632. 

Defining  "foreign  bank"  and  "foreign  banker,"  Stat. 

658. 
Deposits  of  persons  under  disabilities,  Stat.  633. 
Deputy  examiners — How  appointed,  Stat.  607. 
Directors — Election — Term  of  office,  Stat.  623. 
Dividends,  Stat.  624. 
Examination  of,  Stat.  643. 

Examiner : 

Appointment  of,  Stat.  605. 

And  deputy  to  give  bond,  Stat.  608. 


ALPHABETICAL    INDEX.  589 

[References  are  to  Sections.      S'y    equals  "Summary";    Stat,    equals   "Statutes"; 
Pr.  equals  "Procedure."] 

BANKS  (Continued). 

Compensation  and  expenses  of,  Stat.  638. 

Duties  of  other  officers  transferred  to,  Stat.  654. 

Location  of  office,  Stat.  609. 

Not  to  disclose  information,  Stat.  651. 

Seal  of,  etc.,  Stat.  639. 

To  keep  record  of  fees,  Stat.  650. 

To  make  annual  report  to  governor,  Stat.  642. 

To  take  charge,  when,  Stat.  648. 

Vacancy  in  office — How  filed,  Stat.  606. 
Failure  to  report — Penalty,  Stat.  641. 
False  statement  or  entry,  Stat.  656. 
Forfeiture  for  violating  act,  Stat.  657. 
Fee  for  examination,  Stat.  644. 
Filing  of  article,  Stat.  614. 
Formation  of  corporation,  Stat.  612. 
Foreign  banks  not  to  receive  deposits,  Stat.  659. 
Fraudulent  conveyances  void,  Stat.  629. 
Impairment  of  capital,  Stat.  645. 
Inactive  deposits,  report  of,  to  be  made,  Stat.  661. 
Insolvent,  distribution  of  assets,  Stat.  652. 
Joint  deposits,  Stat.  603a. 
Law  not  retroactive,  Stat.  635. 
Liability  of  directors,  Stat.  636. 
Liability  of  stockholders,  Stat.  622. 
Liability  on  forged  checks,  Stat.  602a. 
Loans  to  officers,  Stat.  636. 
May  commence  business — When,  Stat,  618. 
May  hold  real  estate,  when,  Stat.  625. 
National  bank  reorganizing  as  state  bank,  Stat.  628. 
Officers  of,  refusing  report  of  inactive  deposits,  Stat. 

662. 
Powers  of,  Stat.  615. 

Provisions  of  law  affect  all  corporations  receiving  de- 
posits, Stat.  611. 
Receivers,  compensation  of,  Stat.  649. 


590  ALPHABETICAL    INDEX. 

[References  are  to  Sections.     S'y    equals  "Summary";  Stat,  equals  "Statutes"; 
Pr.  equals  "Procedure."  J 

BANKS  (Continued). 

Receiving  deposits,  when  insolvent,  Stat.  441. 

Repeal  of  former  act,  Stat.  655. 

Reports  to  state  examiner — Publication,  Stat.  640. 

Savings  banks,  power  to  do  business,  Stat.  631. 

State  bank  reorganizing  as  national  bank,  Stat.  627. 

Stock-books,  Stat.  620. 

Stockholders  failing  to  pay,  Stat.  617. 

Transfer  of  shares,  Stat.  619. 

Under  control  of  examiner,  Stat.  647. 

Unauthorized  use  of  name,  Stat.  634a. 

Use  of  term  "bank,"  etc.,  prohibited,  when,  Stat.  634. 

Violation  of  act — Appointment  of  receiver,  Stat.  646. 

Benefit  of  Ultra  Vires,  S'y  60. 

Benefits  Received. 

In  case  of  ultra  vires  contracts,  S'y  79. 
Yet  ultra  vires  defense,  S'y  83. 

BENEVOLENT  ASSOCIATIONS. 

Child  a  county  charge — Disposal  of — Notice,  Stat.  700. 
Duties  of  police  officer,  Stat.  701. 
Expenses  during  examination,  Stat.  705. 
Guardianship  of  person  only,  Stat.  703. 
Habeas  corpus — Effect  of  proceedings,  Stat.  704. 
Minor,  confinement  of  in  reform  school,  Stat.  702. 
"When  children  taken  by  process,  Stat.  699. 
"Who  may  take  children — Surrender  by  parents,  Stat. 
698. 

Bequests. 

To  corporation  unauthorized,  S'y  70. 

Bondholders,  S'y  134. 

Bond  Issue  by  County  not  TaJdng  Private  Property,  S'y  284. 

BOOM  COMPANIES. 

Authority  and  powers  of,  Stat.  535. 


ALPHABETICAL    INDEX.  591 

[Beferenees  »re  to  Sections.     S'y    equals  "Summary";  Stat,   equals  "S'tatutea"; 
Pr.  equals  "Procedure."] 

BOOM  COMPANIES  (Continued). 
Damages  for  neglect,  Stat.  539. 
Deemed  public  corporations,  Stat.  533. 
Driving  logs — Tools — Liens,  Stat.  538. 
Duties  of— Tolls,  Stat.  528. 
Eminent  domain  extended  to,  Stat.  525. 
General  powers  and  duties,  Stat.  537. 
How  organized,  Stat.  534. 
Liability  for  damage,  Stat.  531. 
Liability  for  neglect,  Stat.  532. 
May  file  amended  articles,  Stat.  541. 
Must  assort  and  separate  logs,  Stat.  529. 
Plats,  when  filed,  Stat.  536. 
Plat  and  survey  must  be  filed,  Stat.  526. 
Power  to  construct  works,  Stat.  527. 
Rafts,  record  of  must  be  kept,  Stat.  530. 
Rights  to  cease,  when,  Stat.  540. 

BUILDING,  LOAN  AND  SAVINGS  ASSOCIATIONS. 

Act  applies  to  present  companies,  Stat.  575. 

Acts  repealed,  Stat.  577. 

Advertisements,  Stat.  573. 

Annual  report — Penalty,  Stat.  567. 

Approval  of  by-laws,  Stat.  552. 

Attorney  general — Suit  by,  Stat.  569. 

By-laws — Approval,  Stat.  551. 

Capital  stock — Classified  shares,  Stat.  555. 

Checking  accounts  prohibited,  Stat.  561. 

Compliance  with  present  law,  Stat.  572. 

Contingent  fund,  Stat.  562. 

Deposit  of  securities,  Stat.  558. 

Doing  business  without  authority,  Stat.  571. 

Dividends,  Stat.  556. 

Exemption  of  shares  from  taxation,  Stat.  566. 

Foreign  corporation — Forfeiture,  Stat.  570. 


592  ALPHABETICAL    INDEX. 

[References  are  to  Sections.      S'y    equals  "Summary" ;  Stat,   equals   "S'tatntes" ; 
Pr.  equals  "Procedure."] 

BUILDING,  LOAN  AND  SAVINGS  ASSOCIATIONS  (Con^ 
tinued). 
Formation,  Stat.  550. 
Form  of  articles,  Pr.  813. 
Limit  of  expense  fund,  Stat.  564. 
Losses  exceeding  reserve  fund,  Stat.  563. 
Membership,  Stat.  554. 
Names,  Stat.  574. 

Oath  and  bond  of  directors  and  officers,  Stat.  553. 
Penalty  for  violations,  Stat.  576. 
Power  to  hold  realty,  Stat.  560. 
Security  for  loans — Bonds,  Stat.  557. 
Supervision  by  state  auditor,  Stat.  568. 
Surrender  of  securities  by  auditor,  Stat.  559. 
"Withdrawals  by  shareholders — Notice,  Stat.  565, 

By-laws,  Pr.  767. 
Form,  Pr.  801. 
Power  to  make,  S  *y  138. 
Power  to  make  implied,  S'y  43. 

CANAL  COMPANIES. 

Eminent  domain  extended  to,  Stat.  493. 
Right  of,  to  build  over  rivers,  etc.,  Stat.  477. 

Capacity  of  Corporation  to  Take  Land,  S  'y  68. 

CAPITAL  STOCK. 

Banks,  amount  of,  Stat.  414. 

Building,  loan    and    savings    associations — Amount  re- 
quired, Stat.  558. 
Certificate  of  increase  or  decrease  to  be  made,  Stat.  426. 
How  reduced,  Stat.  417. 
Increase  or  decrease  of,  Stat.  424;  Pr.  776. 

Increase  of: 

By   building,   loan  and   savings  associations,  Stat. 
565. 


ALPHABETICAL    INDEX.  593 

[References  are  to  Sections.      S'y    equals   "Summary";   Stat.   eqaaU   "Statutes"; 
Pr.  equals   "Procedure."] 

CAPITAL  STOCK  (Continued). 

By  trust  companies,  Stat.  603. 
Notice  of  meeting  to  increase  or  decrease,  Stat.  425. 
Payment  of,  by  banks,  Stat.  616. 
Personal  estate — Transfer  of,  Stat.  413. 
Stock  not  all  subscribed,  S'y  6. 

Carrying  on  Business,  S'y  235. 

CEMETERY  ASSOCIATIONS. 

Corporate  powers,  Stat.  707. 
Exemptions,  Stat.  710. 

Injury  to  sepulture  or  property— Penalty,  Stat.  712. 
May  be  incorporated,  Stat.  706. 

May  hold  lands— Fund  to  be  created— Debts,  Stat.  708. 
May  hold  property  in  trust,  Stat.  713. 
May  sell  land,  Stat.  709. 

Plat  to  be  recorded — Regulation  of  grounds,  Stat.  711. 
Certificate. 

Of  increase  (or  reduction)  of  capital  stock — Form,  Pr. 

809. 
Of  officers— Form,  Pr.  823. 
Of  trustees — Form,  Pr.  810. 

Change  or  Removal  of  Place  of  Business,  Pr.  774. 

Characteristics  of  Corporations,  S'y  1. 

Character  of  Corporation,  Pr.  760. 

Charitable  Gifts,  S'y  53. 

Charitable  Uses,  S  'y  52. 

Charter. 

Express  statutory  authority,  S'y  33. 
Filed  merely,  S'y  6. 
Limit  of  trustees'  powers,  S'y  159. 
Measure  of  corporate  powers,  S'y  44. 
38 


594  ALPHABETICAL    INDEX. 

[B«ferenee8  are  to  Sections.     S'y    equals  "Summary";  Stat,  equals  "S'tatates^* ; 
Pr.  equals  "Procedure."] 

CHARTER  POWERS. 

Alteration  of  charters,  S'y  39,  41. 

Charter  a  contract,  S'y  37. 

Express  powers,  S'y  35. 

Franchise,  S  'y  32. 

General  corporation  acts,  S'y  34. 

Implied  powers,  S'y  42-46. 

Power  must  affirmatively  appear,  S'y  38. 

Power  to  hold  property,  S'y  47-56. 

Real  property  holding,  S  'y  47-56. 

Special  charter,  S'y  33. 

Special  and  general,  S'y  33. 

Subject  to  eminent  domain,  S'y  253. 

Charters. 

In  different  states,  S'y  3. 

Of  one  corporation  in  several  states,  S'y  218. 

Circuit  Court  U.  8. 

Jurisdiction  in  eminent  domain,  S'y  257. 

Citizen. 

Corporation  is,  of  state  creating  it,  S'y  2. 
Corporation  is,  S'y  217. 

CITY  COUNCILS. 

May  authorize  construction : 

Of  electric  railways,  Stat.  511. 

Of  lines  for  power  transmission,  Stat.  507. 

Classification. 

Of  property  rights,  S'y  270. 

Collateral  Attack. 

On  condemnation  proceedings,  S'y  308. 
On  de  facto  corporation,  S  'y  20. 

Collateral  Question. 

As  to  holding  land  where  partially  authorized,  S'j  71. 


ALPHABETICAL    INDEX.  595 

[R«fereneM  an  to  9«otion«.     S'r    equals  "Summary";    Stat.  eqa«U  "Statutes"; 

Pr.   equals   "Procedure."] 

Colorable  Articles  of  Association,  S'y  19. 
Colorable  Attempt  to  Form  Corporation,  S'y  21. 
Combinations  and  Conspiracies,  S'y  102. 
Combinations  in  Restraint  of  Trade,  S'y  101. 

Comity. 

Acts,  suits  and  contracts,  S'y  216. 
Of  states,  S'y  213-215. 

Commissioners  in  Condemnation,  S'y  301. 

Qualifications,  S'y  308. 

Commissioners'  Findings. 
Review,  S'y  302. 

Compensation. 

Ascertainment  delegated,  S'y  309. 

Certainty  of,  S'y  293. 

Estimation  of  franchise,  S'y  291. 

For  private  property,  S'y  290. 

For  property  condemned,  S'y  259. 

When  to  be  paid  in  condemnation,  S'y  292. 

Condemnation. 

By  federal  government,  S'y  256. 
Of  state  lands,  Stat.  464a. 
Filing  decree,  Stat.  464a. 

CONDEMNATION  (EMINENT  DOMAIN). 

Adjournment  of  proceedings,  Stat.  465. 

Appeal,  Stat.  471. 

Appeal  shall  not  delay  work,  Stat.  472. 

Damages  may  be  paid  into  court,  Stat.  469. 

Disposition  of  money — Conflicting  claims,  Stat.  470. 

Extent  of  right  of  appropriation,  Stat.  475. 

Electric  railways  may  secure  right  of  way,  Stat.  512. 

Judgment  and  decree,  Stat.  468. 


596  ALPHABETICAL    INDEX. 

[References  are  to   Sections.      S'y    equals   "Summary" ;    Stat,  equals   "Statutes" ; 
Pr.    equals    "Procedure."] 

CONDEMNATION  (EMINENT  DOMAIN)  (Continued). 

Jury  shall  be  summoned,  Stat.  466. 

Notice,  contents  of  and  service,  Stat.  464. 

Of  water  by  mining  and  manufacturing  companies,  Stat. 
462. 

Procedure — Petition,  requisites  of,  Stat.  463. 

Right  of  railroad  companies,  etc.,  to  enter  lands  for  sur- 
vey, Stat.  474. 

Rights  of  railroads  through  defiles,  Stat.  473. 

Right  of  railroad  to  cross  or  connect  with  other  roads, 
Stat.  476. 

Telegraph  and  telephone  companies  may  build  along 
railroad  lines,  Stat.  480. 

Trial — Assessment  of  Damages — Judgment,  Stat.  467. 

Conditions. 

Of  lav/  (incorporation),  S'y  18. 
Precedent  (incorporation),  S'y  18. 
To  doing  business,  S'y  230. 

Conflicting  Jurisdiction. 

Receivers,  S'y  186. 

Consent  of  State. 

To  doing  business,  S'y  230. 

Consequential  Dajnages. 

Not  taking  property  (condemnation),  S'y  280. 
To  property  (condemnation),  S'y  274. 

Consolidation,  S'y  175. 

And  merger  rights,  S'y  175-179. 

Constitutional  Limitations. 

On  eminent  domain,  S'y  250. 

CONSTITUTIONAL  PROVISIONS. 

Combinations  forbidden — When,  Stat.  743. 
Common  carriers — Rights  of,  Stat.  743. 


ALPHABETICAL    INDEX.  597 

[Beferences   »?•  to   Sections.      S'y    equals   "Summary";    Stat,  eqtiata   "SXatutei"; 
Pr.    equals    "Procedure."] 

CONSTITUTIONAL  PROVISIONS  (Continued). 

Competing  railroads  not  to  consolidate,  Stat.  745. 

Corporation : 

Construed  to  include  what,  Stat.  735. 

Not  to  be  created  by  special  laws,  Stat.  732. 

Stock,  fictitious  issue  of,  void,  Stat.  736. 

Discrimination  in  rates  forbidden,  Stat.  744. 

Eminent  domain — State  may  exercise  right  of,  Stat.  740. 

Foreign  corporations  shall  conform  to  state  laws,  Stat. 
737. 

Free  passes  forbidden,  Stat.  749. 

Insolvent  banks  not  to  receive  deposits,  Stat.  742. 

Leasing  or  alienation  of  franchise,  Stat.  738. 

Legislation  not  to  extend  or  remit  forfeiture  of  fran- 
chise, Stat.  733. 

Liability  of  stockholders,  Stat.  734. 

Liability  of  stockholders  in  banking  and  insurance  cor- 
porations, Stat.  741. 

Railroads    not  to    discriminate    against    express    com- 
panies, Stat.  750. 

Regulation  of  fares,  etc.,  by  legislature,  Stat.  747. 

Rolling  stock  personal  property,  Stat.  746. 

State  shall  not  loan  aredit  to  corporations,  Stat.  739. 

Telegraph  and  telephone  companies,  Stat.  748. 

Trusts  and  monopolies  forbidden,  Stat.  751. 

Constitutional  Requirements  for  Condemnation,  S'y  293,  294. 

Construction. 

Of  Sherman  Act,  S'y  104. 

ContemplS/tion  of  Law. 

Corporation  exists  in,  S'y  1. 

Contract. 

Charter  is,  S'y  35. 
Corporate  power,  S'y  211. 

In  other  states,  S'y  1,  212. 


598  ALPHABETICAL    INDEX. 

[Beferenen  are  to  Seotion«.     S'7    equals  "Summary";   Stat,  equals  "Statutes"; 
Pr.  equals    "Proce'dure."  ] 

Contract  (Continued). 

Liability  of  directors  and  officers,  S'y  165-169. 
Not  expressly  authorized,  S'y  81. 
Transactions  not  authorized,  S'y  60. 
Partially  performed — Estoppel,  S'y  75. 
"With  corporation  not  individuals,  S'y  21. 
"With  de  facto  corporation  ratified,  S'y  21. 

Conversion. 

Of  stock,  S'y  117. 

Conveyajices. 

Authorized  by  charter,  S'y  55. 
For  ultra  vires  purposes,  S'y  56. 
Void  and  voidable,  S'y  55. 

CO-OPERATIVE  ASSOCIATIONS. 

Amendments,  Stat.  546e. 
Annual  reports,  Stat.  546n. 
Articles,  Stat.  546a. 
Articles— Form  of,  Pr.  824. 
By-laws,  Stat.  546r. 
Constitutionality,  Stat.  546t. 
Co-operative — Use  of  term,  Stat.  546p. 
Dividends — Distribution,  Stat.  546m. 
Doing  business — Liability,  Stat.  546q. 
Earnings,  Stat.  5461. 
Existing  companies,  Stat.  546o. 
Filing  articles,  Stat.  546b. 
Filing  fees,  Stat.  546c. 
Lawful  business,  Stat.  546f. 
Officers,  Stat.  546d. 
Organization,  Stat.  546, 
Purchase  of  business,  Stat.  546i. 
Stock — Certificates,  Stat.  546j. 
Stock  issue,  Stat.  546g. 
Stockholders — Voting,  Stat.  546k. 


ALPHABETICAL    INDEX.  599 

[ReferencM  are  to  Sections.     S'y    equals  "Summary";    St»t.  eqm»li  "Statutes"; 
Pr.   equals    "Procedure."] 

CO-OPERATIVE  ASSOCIATIONS  (Continued). 
Subscriptions,  Stat.  546h. 
Trust— Stock  held  in,  Stat.  546j. 
Trustees,  Stat.  546d. 

Corporate  Acts. 

To  constitute  organization,  S'y  4. 

Corporate  Bond. 
Form,  Pr.  816. 

Corporate  Capacity,  S  'y  211. 
A  franchise,  S'y  32. 

Corporate  Entity. 

Created,  S'y  7. 
Not  created,  S'y  6. 

CORPORATE  EXISTENCE. 

Characteristics  of  corporation,  S'y  1. 

Individuality,  S'y  2. 

Citizenship,  S'y  2. 

Residence  and  citizenship,  S'y  2,  3. 

Organization,  S'y  4r-7. 

CORPORATE  NAME. 

Unauthorized  use,  Stat.  634a. 

Corporate  Powers. 

In  trustees,  Stat.  407. 

Must  be  within  constitution  and  statutes,  S'y  46. 

Not  exceeded — Presumption,  S'y  86. 

CORPORATE  PROCEDURE. 

Character  of  corporation,  Pr.  760. 
Kinds  of  corporation,  Pr.  761. 
Preliminary  considerations,  Pr.  762. 
Articles  of  incorporation,  Pr.  763. 
First  meeting  of  trustees,  Pr.  764. 
Subscription,  Pr.  765. 


600  ALPHABETICAL    INDEX. 

[Befeirene«s   are  to   Sections.      S'y    equals   "Summary";    Stat,  equal!   "Statntea"; 
Pr.    equals    "Procedure."] 

CORPORATE  PROCEDURE  (Continued). 
Preferred  stock,  Pr.  766. 
By-laws,  Pr.  767. 
Issue  of  stock,  Pr.  768. 
List  of  officers,  Pr.  769. 
Meetings  of  trustees,  Pr.  770. 
Records  and  papers,  Pr.  771. 

Assessments  and  subscriptions,  Pr.  772. 

Change  of  name,  Pr.  773. 

Change  of  place  of  business,  Pr.  774. 

Stockholders'  meeting,  Pr.  775. 

Increase  or  decrease  of  stock,  Pr.  776. 

Dissolution,  Pr.  777. 

Foreign  corporation,  Pr.  778. 

Corporate  Rights. 

Measured  by  statutes  not  common  law,  S'y  45. 
To  hold  land  questioned  by  individual,  S'y  50. 

CORPORATIONS  (General  Provisions) . 

Adoption  of  name  of  delinquent,  Stat.  725. 

Agent   of   foreign   company — Fee   for  filing   certificate, 

Stat.  716. 
Amendment    or    supplemental    articles — Fee    for   filing, 

Stat.  715. 
Articles  to  be  filed — Contents,  Stat.  402. 
Certified  copies  of  articles — Fee  for  furnishing,  Stat.  717. 
Certificate  of  increase  or  decrease  of  stock,  Stat.  426. 
Charged  with  crime — Procedure,  Stat.  731. 
Copy  of  articles  as  evidence,  Stat.  405. 
Delinquent — Rights  restored,  when,  Stat.  560. 
Dissolution  of,  for  nonpayment  of  fees,  Stat.  724. 
Dissolution  proceedings,  Stat.  428. 
Dividends — Capital  stock,  how  reduced,  Stat.  417. 
Doing  business  without  license,  Stat.  442. 
Executors  may  vote  stock,  Stat.  415. 
False  entries  in  records,  Stat.  421. 
False  report  of,  Stat.  443. 


ALPHABETICAL    INDEX.  601 

[References   are  to   Sections.      S'y    equals   "Sumraarj''' ;    Stat,  equals   "Statutes"; 
Pr.    equals    "Prooodure."] 

CORPORATIONS  (General  Provisions)  (Continued). 
Fees: 

For  filing  articles,  Stat.  714. 

Not  to  apply  to  certain,  Stat.  727. 
Form  of  acknowledgment  of  instmment,  Stat.  451. 
Fraud  in  stock  subscriptions,  Stat.  439. 
Fraudulent  issue  of  stock,  Stat.  440. 
Hereafter  organized,  Stat.  404. 

How  organized — Conditions  and  liabilities,  Stat.  401. 
Increase  or  decrease  of  capital  stock,  Stat.  424. 
Lapse  of  election  of  trustees,  Stat.  409. 
Liability : 

Of  executor,  holding  stock,  Stat.  419. 

Of  trustees,  Stat.  417. 
License  fee — Penalty  for  nonpayment,  Stat.  719. 
List  of  officers  to  be  filed,  Stat.  403. 
May  hold,  own  and  vote  stock  of  other  corporations,  Stat. 

408. 

Meeting: 

Notice  of,  to  increase  or  decrease  stock,  Stat.  425. 
Of  stockholders,  Stat.  411. 
Of  trustees,  Stat.  411, 

Names: 

Not  to  be  duplicated,  Stat.  437. 

To  be  stricken,  when,  Stat.  720. 
Negotiable  paper,  power  to  issue,  Stat.  418. 

**Not  formed  for  profit": 

Amendment  of  by-laws,  Stat.  671. 

Change  of  purpose,  Stat.  670. 

Dissolution — Cannot  have  receiver,  when,  Stat.  672. 

Existing   corporations  may   reorganize   under  act, 

Stat.  674. 
Filing  and  license  fee,  Stat.  675. 
Formation — Purposes,  Stat.  663. 
Membership — No  capital  stock — Shares  not  to  be 

issued,  Stat.  664. 


602  ALPHABETICAL    INDEX. 

[References  are  to  Sections.     S'y    equals  "Summary";    Stat,  eqnals  "Statutes"; 
Pr.   equals   "Procedure."] 

CORPORATIONS  (General  Provisions)  (Continued). 

Membership  certificates — Assignable,  Stat.  665. 

Must  adopt  by-laws,  Stat.  668. 

Organization — Articles  to  be  filed,  Stat.  667. 

Powers  of,  Stat.  669. 

Shall  not  engage  in  business  for  gain,  Stat.  673. 

Termination  of  membership,  Stat.  66i6. 
Penalty  for  reinstatement,  Stat.  729. 
Pledge  of  stock,  effect  of,  Stat.  416. 

Powers : 

Enumerated,  Stat.  406. 

How  exercised,  Stat.  407. 

Of  trustees  upon  dissolution,  Stat.  427. 
Principal  place  of  business,  removal  of,  Stat.  429. 
Prior  to  1872,  may  hold  property,  Stat.  435. 
Prior  to  1862,  may  make  and  secure  debts,  Stat.  436. 
Protection  of  stockholders  from  fraudulent  reports,  Stat. 

438. 
Provisions  of  law  extend  to  water  companies,  Stat.  431. 
Quorum  of  trustees,  Stat.  410. 
Record  of  stockholders,  Stat.  420. 
Recording  fees,  when  to  be  paid,  Stat.  718. 
Reinstatement  of  delinquent: 

Application  for,  Stat.  721. 

Conditions,  Stat.  722. 
Right  of  stockholders  in  mining  companies  to  inspect, 

Stat.  422. 
Shall  not  maintain  suit  unless  license  is  paid,  Stat.  720. 
Stock  in,  personal  estate,  Stat.  413. 
Stockholders  closing  business  of  defunct  corporation, 

Stat.  728. 
Subscriptions,  assessments,  sale  of  shares,  etc.,  Stat.  414. 
Supplemental  articles — Statement  to  be  filed,  Stat.  430. 

CORPORATIONS  DE  JURE  AND  DE  FACTO. 

Substantial  compliance  with  statute,  S'y  18'. 
Partial  compliance  with  statute,  S'y  19. 


ALPHABETICAL    INDEX.  603 

[Referemoes  are  to  Sections.     S'y    equals  "Summary";   Stat,  eqitals  "Statutea"; 

Pr.   equals   "Procedure."] 

CORPORATIONS  DE  JURE  AND  DE  FACTO  (Continued). 

Estoppel,  S'y  20. 

Stockholders'  liability,  S'y  21,  22. 

CORPORATION  LAWS. 

Fee  for  certifying  to,  Stat.  726. 

Corporation,  Right  to  be,  Franchise,  S'y  18. 

COUNTY  ASSESSOR. 

Failure  to  report  list  of  foreign  corporations,  Stat.  461. 
To  report  to  county  auditor,  Stat.  458. 

COUNTY  AUDITOR. 

Failure  of,  to  report  list  of  foreign  corporations,  Stat. 

461. 
To  report  to  Secretary  of  State,  Stat.  459. 

COUNTY  COMMISSIONERS. 

May  authorize  construction  of  electric  railways,  Stat. 
511. 

May  authorize  construction  of  lines  for  power  transmis- 
sion, Stat.  508. 

Creation. 

Must  be  clearly  implied,  S'y  3. 

Creature  of  Law. 

Corporation  is,  S'y  45. 

Creditor. 

Entitled  to  receiver,  S'y  189-191. 

Crimes. 

Corporate,  S'y  90. 
Forfeiture  for,  S'y  90. 

CRIMINAL  OFFENSES  AND  TORTS. 

Agents  must  comply  with  law,  Stat.  423. 
Banks  receiving  deposits  when  insolvent,  Stat.  441. 
Banking  corporations,  failure  of,  to  report,  Stat.  641. 
Banking  officers  making  false  statements,  etc.,  Stat.  656. 
Counterfeiting  trademarks — Penalty,  Stat.  402. 


604  ALPHABETICAL    INDEX. 

(Referemoes  are  t«   Section*.     S'y    equals  "Summary";    Sfcat.  equals  "Statutes"; 
Pr.   equals    "Procedure."] 

CRIMINAL  OFFENSES  AND  TORTS  (Continued). 
Crimes  and  torts,  S  'y  90. 
Doing  business  without  license,  Stat.  442. 
Failure  of  carrier  to  redeem  unused  passage  ticket,  Stat. 

450. 
Failure  of  county  assessor  or  auditor  to  report  list  of 

foreign  corporations,  Stat.  461. 
Foreign  corporation  having  no  resident  agent,  Stat.  455. 
Failure  to  cancel  bill  of  lading,  Stat.  448. 
False  entries,  Stat.  421. 

False  entries  in  records  of  trust  companies,  Stat.  595. 
False  report  of  corporation,  Stat.  443. 
Filing  fraudulent  trademarks,  Stat.  404. 
Fraud  in  stock  subscriptions,  Stat.  439. 
Fraudulent  issue  of  stock,  Stat.  440. 
Injury  to  cemetery,  Stat.  712. 

Liability  of  agent  of  foreign  corporation,  Stat.  460. 
Penalty  for  unauthorized  use  of  trademark,  Stat.  406. 
Persons  selling  passage  tickets  without  authority,  Stat. 

449. 
Telegraph   or  telephone   company   failing  to   transmit 

message,  Stat.  522. 

Warehousemen : 

Fraudulently  mixing  goods,  Stat.  446. 
Issuing  duplicate  receipt,  Stat.  447. 
Issuing  fictitious  bill  of  lading,  Stat.  445. 
Refusing  to  issue  receipt,  Stat.  444. 

Dam. 

For  manufacturing  purpose,  S'y  258. 

Damming  Rivers,  S  'y  277. 

Dams. 

For  water-power,    regulation  of  property,  S'y  285. 

Dealing  With  Corporation,  S'y  19. 

Deed. 

Acts  by  corporation  without,  S'y  42. 


ALPHABETICAL    INDEX,  605 

[References  are  to   Sections.     S'y    equals  "Summary";   Stat,  eqnali  "Statutei"; 
Pr.   equals    "Procedure."] 

De  Facto  Corporation,  S  'y  18. 
Contract,  S'y  21. 

De  Facto  Officers. 

Contract  binding,  S'y  161. 
De  Jure  Corporation,  S  'y  18. 
Delegated  Power,  S'y  136. 

DELINQUENT  CORPORATIONS. 

Adoption  of  name  of,  Stat.  720. 
Reinstatement : 

Of— Conditions,  Stat.  729. 

Application  for,  Stat.  321, 
Rights  restored — When,  Stat.  723. 

Devises  of  Land. 

Executory  character  of,  S'y  53, 

In  excess  of  statutory  limitations,  S'y  52. 

Devise  to  Corporation. 

Where  prohibited,  S'y  50. 

Directors,  S'y  155. 

Transactions  with  corporation  voidable,  S'y  164. 

DIRECTORS  AND  OFFICERS. 

Accountability,  S'y  159,  163, 

Agents  of  corporation,  S'y  155, 

Contracts  with  themselves  voidable,  S'y  164. 

De  facto  officers,  S'y  161. 

Election  of,  in  banking  corporation,  Stat.  623. 

Fiduciary  relation,  S'y  158. 

Fraudulent  acts,  S'y  163. 

In  banks,  liability  of,  Stat.  636. 

Liability  as  individuals,  S'y  165-167, 

Liability  as  individuals  on  contracts,  S'y  168,  169, 

Ostensible  authority  of  officer,  S'y  160. 

Powers  of  directors,  S'y  156. 

Powers  of  officers.  S'y  157. 

Ratification,  S'y  162. 


606  ALPHABETICAL    INDEX. 

[References  are  to   Sections.     S'y    equals  "Summary";   Stat,  equals  "Statutes"; 
Pr.   equals   "Procedure."] 

Dissolution,  Pr.  777;  S'y  195,  196. 

Appointment  of  receiver,  S'y  197. 
Diversity  of  Citizenship,  S'y  217. 

Dividends. 

On  preferred  stock,  S'y  129. 

Doing  Business. 

In  state,  S'y  220. 

What  constitutes,  S'y  235. 

Domicile. 

Of  corporation,  S'y  114. 

In  each  state,  S'y  3. 
Doubts  Construed  Against  Corporation,  S'y  38. 
Due  Process  of  Law,  S  'y  260. 

Earnings,  S'y  130. 

Easement. 

Compensation  for  taking,  S'y  272. 

EDUCATIONAL  ASSOCIATIONS.     See  Religious  etc.  Asso- 
ciations. 

Election. 

Of  directors  and  president,  S'y  5;  Stat.  407. 

ELECTRIC  POWER  COMPANIES. 

Authority  to  construct  transmission  lines,  Stat.  508. 
Deemed  public  service  corporations,  Stat.  495. 
Electricity  not  to  be  used  for  private  purposes,  Stat. 

496. 
Eminent  domain  extended  to,  Stat.  487. 
Damages  paid  in  court,  Stat.  469. 
May  forfeit  franchise,  Stat.  497. 
May  lease  or  purchase  property  of  other  corporations, 

Stat.  508. 
Procedure  in  condemnation  cases,  Stat.  489. 
Right  of,  to  enter  lands  for  surveys,  etc.,  Stat.  488. 
Right  of  easement,  Stat.  494. 


ALPHABETICAL    INDEX.  607 

[R«feT«Ticea  are  to  Sections.     S'y    equals  "Summary";    Stat,  equals  "Statatea"; 
Pr.    equals    "Procedure.") 

ELECTRIC  RAILWAY  COMPANIES. 

Authority  to  construct  roads,  Stat.  511. 

Eminent  domain  extended  to,  Stat.  484. 

Damages  paid  in  court,  Stat.  469. 

May  lease  or  purchase  property  of  other  corporations, 

Stat.  513. 
Procedure  in  condemnation  cases,  Stat.  486. 
Right  of,  to  enter  lands  for  surveys,  etc.,  Stat.  485. 

EMINENT  DOMAIN. 

And  taxation,  S'y  263." 

As  to  charter  or  franchise,  S'y  253. 

Public  use,  S'y  250-266. 

Taking  of  private  property,  S'y  270-288. 

Compensation,  S'y  290-295. 

Condemnation  procedure,  S'y  300-311. 

Extended  to : 

Boom  companies,  Stat.  525. 

Canal  companies,  Stat.  493. 

Electric  railway  companies,  Stat.  512. 

Electric  power  companies,  Stat.  487. 

Mining  companies,  Stat.  481. 

Telegraph  companies,  Stat.  514. 

Telegraph  and  telephone  eompanies,  Stat.  478. 

Toll-logging  roads,  Stat.  545. 

Water-power  companies,  Stat.  490. 
Right  of  telegraph  and  telephone  companies  to  enter 

upon  land,  Stat.  479. 
Right  to  appropriate  water  and  build  dams,  etc.,  Stat. 

462. 

Enforceable,  Ultra  Vires  Contracts  not,  S'y  84. 

Estoppel. 

In  corporations  de  facto,  S'y  19,  21. 

In  connection  with  ultra  vires  acts,  S'y  60. 

To  deny  corporate  powers,  S'y  61. 

To  plead  ultra  vires,  S'y  76,  78,  84. 

Where  ultra  vires  not  ascertainable,  S'y  86. 


608  ALPHABETICAL    INDEX. 

[R«fe(renoes  are  to  Sections.     S'y    equals  "Summary";   Siat.  equals  "Statutes"; 

Pr.    equals    "Procedure."] 

Excessive  Taxation. 

Taking  of  private  property,  S'y  287. 
Excise,  Federal,  Stat.  752-759. 
Exclusive  Covenants,  S'y  97. 
Exclusive  Right. 

To  franchise  not  presumed,  S  'y  36-38. 

Exclusive  Words. 

Necessary,  S'y  38, 
Executed  and  Executory  Contracts  Ultra  Vires,  S'y  60. 
Executed  Ultra  Vires  Contracts,  S  'y  78,  79. 

EXECUTORS. 

Liability  of,  holding  stock,  Stat.  419. 
May  vote  stock,  Stat.  415. 

Executory  Transaction  Regarding  Real  Property,  S'y  56. 

Executory  Ultra  Vires  Contracts,  S'y  78. 

Existence,  Corporate,  S'y  1. 

Expectant  or  Contingent  Rights,  S'y  40. 

Expiration  of  Charter,  S  'y  205. 

Express  Powers,  S  'y  35. 

False  Reports,  Stat.  651a. 

Feame's  Definition  of  Vested  Rights,  S'y  40. 

Federal  Corporation  Tax  Law,  Stat.  752-759. 

Fee  in  Lands  by  Corporations  of  Limited  Period,  S  'y  48. 

Fees,  Pr.  762. 

Must  be  paid  in  advance,  Stat.  730. 
Paid  to  Secretary   of  State.     See   Schedule  preceding 
index. 

Feudal  Rights. 

Lost  in  lands  held  by  corporations,  S'y  52. 

Fiduciary  Relation. 

Of  officers  and  trustees,  S'y  158. 
Foreign  Attachment,  S  'y  231. 


ALPHABETICAL    INDEX.  609 

[Bcferenoes   are  to   Sections.      S'y    equals   "Summary" ;    Stat,  equals   "Statutes" ; 
Pr.   equals    "Procedure."] 

Foreign  Bank,  S  'y  21 1 . 

Law  not  to  apply  to,  when,  Stat.  457. 

Recording  fees,  Stat.  459a. 

Powers  of,  in  this  state,  Stat.  452. 

Suits  by  and  against  such  corporations.  S'y  222-234:. 

FOREIGN  CORPORATIONS,  S'y  210;  Pr.  778. 
Agent's  liability,  Stat.  460. 

Agent: 

Appointment  of,  to  be  filed,  Stat.  454. 

To  accept  service,  Stat.  454. 

Appointment  of — Form,  Pr.  811. 

Authority,  S'y  220. 
Certified  copy  of  charter  to  be  filed,  Stat.  453. 
Charter  law  controlling,  S'y  219. 
Contracts  in  other  states,  S'y  210^218. 
County  assessors  to  secure  list  of,  Stat.  458. 
County  auditors  to  report  list  of,  to  Secretary  of  State, 

Stat.  459. 
Doing  business,  S'y  220,  234-237. 
Failure  to  comply  with  law — Penalty,  Stat.  455. 
Federal  suits,  S'y  221. 

Foreign  Country. 

Contracts  in,  S'y  213. 

Forfeiture. 

Does  not  extinguish  debts,  S'y  200. 
Of  charter,  S'y  195. 
State  only  to  enforce,  S'y  198. 
Under  Mortmain,  S  'y  52. 

Forged  Check. 

Liability  on,  Stat.  602a. 

Forged  Transfer  of  Stock. 

Invalid,  S'y  120. 

FORMS. 

Acknowledgment,  corporate,  Stat.  451. 

39^ 


610  ALPHABETICAL    INDEX. 

[References  are  to  Sections.     S'y    equals  "Summary";   Stat,  equals  "Statutes"; 
Pr.   equals   "Procedure."] 

FORMS  (Continued). 

Articles  of  incorporation  (general),  Pr.  797. 

Minutes  of  first  meeting,  Pr.  798. 

Notice  of  first  meeting,  Pr.  799. 

Oath  of  trustees,  Pr.  800. 

By-laws,  Pr.  801. 

Stock  certificate,  Pr.  802. 

Subscription,  Pr.  803. 

Statement  of  officers,  Pr.  806. 

Notice  of  change  of  nam€,  Pr.  807. 

Supplemental  articles,  Pr.  808. 

Certificate  of  increase  or  decrease  of  stock,  Pr.  809. 

Notice  of  special  meetings,  Pr.  809. 

Appointment  of  agent  by  foreign  corporation,  Pr.  811. 

Proxy,  Pr.  812. 

Articles  building  and  loan  association,  Pr.  813. 

Articles  trust  company,  Pr.  814. 

Articles  of  bank,  Pr.  815. 

Corporate  bond,  Pr.  816. 

Notice  of  annual  meeting,  Pr.  817. 

Notice  of  trustees'  meetings,  Pr.  818. 

Waiver  of  meeting,  Pr.  819. 

Notice  of  removal  of  place  of  business,  Pr.  820. 

Notice  of  assessment  on  stock,  Pr.  821. 

Petition  for  voluntary  dissolution,  Pr.  822. 

Certificate  of  officers  (petition  for  dissolution),  Pr.  823. 
Franchise. 

Charter  a,  S'y  254. 

Condemnation  of,  S'y  275. 

Definition,  S'y  32. 

Examples,  S'y  32. 

Exists  only  by  legislative  authority,  S'y  32. 

Grant,  creation  of  corporation  is,  S'y  32. 

In  corporation,  S  'y  7. 

Right  forfeited,  S'y  21. 

Of  corporate  existence,  S'y  32. 

Of  the  corporation,  S'y  32. 

Subject  to  eminent  domain,  S'y  253. 


ALPHABETICAL    INDEX.  611 

[References   are  to   Sections.      S'y    equals  "Summary";    Stat,  equals   "St«t«t««"; 
Pr.   equals   "Procedure."] 

Fraud. 

Liability  of  directors  and  officers,  S'y  165, 
On  the  part  of  directors  and  trustees,  S'y  163. 
Tainting  formation,  S'y  21. 

Fraudulent  Transfer  of  Stock. 

Effect,  S'y  127. 

Full  Performance  of  Ultra  Vires  Contracts,  S  'y  77. 

Gains  and  Profits. 

Corporate,  S'y  130. 

General  Incorporation  Laws,  S  'y  34. 

GRANGES. 

General  rights  and  liabilities,  Stat.  549. 
Manner  of  incorporating,  Stat.  547. 
May  engage  in  certain  pursuits,  Stat.  548. 

HIGHWAY  AND  GRADE  CROSSINGS. 

Act  when  not  operative,  Stat.  510u. 
Appropriation,  Stat.  510x. 
Changes  in  crossings,  Stat.  510c. 
Constitutionality,  Stat.  510v. 
Construction  work — Cost,  Stat.  510f. 
Cost  of  crossings,  Stat.  510e. 
Duty  to  maintain  crossings,  Stat.  510d. 
Eminent  domain,  Stat.  510n. 
Engineers — Employees,  Stat.  510m. 
Grade  crossings — Prohibited,  Stat.  510a. 
Illegal  crossings,  Stat.  510o. 
Mandamus,  Stat.  510p. 
New  crossings — Petitions,  Stat.  510b. 
Notices — Service,  Stat.  510k. 
Penalty  for  violation,  Stat.  510q. 
Plans  and  specifications,  Stat.  510g. 
Posts,  piers  and  abutments,  Stat.  510s. 
Practice  and  procedure,  Stat.  510j. 
Repeal,  Stat.  510w. 


612  ALPHABETICAL    INDEX. 

[References  »re  to   Sections.      S'y    equals   "Summary";    Stat,  equals   "Statutes"; 
Pr.    equals    "Procedure."] 

HIGHWAY  AND  GRADE  CROSSINGS  (Continued). 

Review  and  appeal,  Stat.  5101. 

Right  of  action,  Stat.  510t. 

Temporary  crossings,  Stat.  510a. 

Time  for  construction,  Stat.  510i. 
Holding  Land. 

Where  authorized  for  certain  purposes,  S'y  71, 

Where  transaction  executory,  S'y  56. 
Holding  Property. 

By  corporations,  S'y  47. 

Main  purpose  of  corporation,  S'y  47. 

HUSBANDRY,  PATRONS  OF.     See  Granges. 

Illegality  of  Ultra  Vires  Contracts,  S  'y  64,  76. 

Illegal  Transactions  and  Estoppel,  S'y  75. 

Imaginary  Corporation,  S'y  20. 

Impairing  Obligation  of  Contracts,  S'y  253. 

Impairment  of  Charter  Contract,  S'y  35. 

Implication  of  Powers,  S'y  35. 

Implication  of  Rights  and  Powers  of  Corporations,  S'y  42. 

Implied  and  Express  Corporate  Powers,  S'y  44. 

Implied  Limitations  on  Holding  Property,  S'y  53. 

Implied  Power; 

To  hold  property,  S'y  47. 
To  contract,  S'y  43. 

Implied  Promises. 

Of  corporation,  S'y  42. 
Of  stockholders,  S'y  121. 

Implied  Statutory  Limitations,  S'y  49. 
Incapacity  to  Make  Ultra  Vires  Contract,  S  'y  62. 
Incidental  Corporate  Objects,  S'y  44. 
Incidental  Powers  of  Banks,  S'y  37. 
Incidents  of  Corporation. 
Implied,  S'y  44. 


ALPHABETICAL    INDEX.  613 

[Refegnemeea   are  to   Sections.      S'j    equals   "Summary";    Stat,  eqaala   "Statutes"; 
Pr.   equals    "Procedure."] 

Incorporation  of  Private  Banks,  Stat.  634b. 

Incorporators. 

Corporate  franchises  belonging  to,  S'y  7. 

Increase  or  Decrease  of  Capital  Stock,  Pr.  776. 

Individual. 

Corporation  is,  S'y  2. 

Questioning  corporate  right  to  hold  land,  S'y  50. 

Stockholder,  right  to  sue,  S'y  131. 

Inhabitant  of  State  Creating  It. 

Corporation  is,  S  'y  2. 

Inherent  Right. 

To  hold  property,  S'y  53. 

Injunction. 

Against  insolvent  corporation,  S'y  202. 
Right  to,  S'y  131. 

Injustice  of  Ultra  Vires  Defense. 

Questioned  and  denied,  S'y  88. 

Inquisition  in  Condemnation,  S'y  310. 

Insolvent  Company,  S'y  202. 

Installments. 

Of  subscriptions  unpaid,  S'y  122. 

INSURANCE  COMPANIES.     Write  State  Insurance  Com- 
missioner. 

Intention. 

In  question  of  doing  business,  S'y  235. 

Interest. 

On  amounts  assessed  on  condemnation,  S'y  303. 

Interstate  Commerce,  S'y  220. 
Trade  or  commerce,  S'y  104. 
Transactions,  S'y  237. 

Inviolability  of  Corporate  Charters,  S'y  36. 

Irrevocable  Proxy,  S  'y  142. 


614  ALPHABETICAL    INDEX. 

[R«fermc«a  we  to   Sections.     S'y    equals  "Summary" ;   Stat,  equali  "Statutes" ; 
Pr.   equals   "Procedure."] 

IRRIGATION. 

As  public  use,  S  'y  262. 
Railroads  may  build  ditches,  Stat.  506. 
Irrigation  Assessment,  S'y  264. 

IRRIGATION  COMPANIES. 

Eminent  domain  extended  to,  Stat.  493. 
Right  of  easement  (eminent  domain),  Stat.  494. 
Issue  of  Stock. 

Below  par  invalid,  S'y  125. 
For  property,  S'y  123;  Pr.  768. 

Joint  Deposits,  Stat.  603a. 

Judgment  of  Condemnation. 

Conclusive,  S'y  305. 
Judicial  Determinations  (Eminent  Domain),  S'y  251, 
Jurisdiction. 

Of  state  court,  S'y  260. 

To  appoint  receiver,  S'y  186,  187. 
Just  Compensation,  S'y  294. 
Justice  and  Injustice  in  Ultra  Vires  Contracts,  S'y  81. 

Kinds  of  Corporations,  Pr.  761. 
Knov/ledge  of  Ultra  Vires  Contracts,  S  'y  76. 

Law. 

Authorizing  corporation — None,  S'y  21. 

Of  charter  governs,  S'y  219. 
Lease  Ultra  Vires. 

Validity,  S'y  77. 
Legal  Possibility  to  Make  Ultra  Vires  Contracts,  S  'y  76. 
Legal  Validity. 

None  in  ultra  vires  acts,  S'y  60. 
Legal  Wrongdoing. 

Tainting  formation,  S'y  21. 
Legislative  Determination  of  Improvenijent  Benefit,  S'y  288. 


ALPHABETICAL    INDEX.  615 

[B«f«re>nc«s   are  to   Sections.      S'y    equals   "Summary";    Stat,  equals   "Statutes"; 
Pr.   equals   "Procedure."] 

Liability. 

Of  directors  of  de  facto  corporation,  S'y  21. 

Of  officers  of  de  facto  corporation,  S'y  21. 

Of  pledgee  of  stock,  S'y  127. 

Of  Stockholders,  S'y  111. 

Of  stockholders  above  par  value — Statutory,  S'y  126. 

Of  stockholders  of  de  facto  corporation,  S'y  21. 

Of  stockholders  to  creditors,  S'y  123,  124. 

Of  stockholders  to  pay  fully,  S'y  125. 

Licenses. 

Holding  property  without,  S'y  53. 

Limit. 

Taking  property  in  excess  of,  S'y  50. 

Limitations,  S'y  38. 

Express  statutory,  S'y  49. 
In  statutes  on  holding  property,  S'y  53. 
Of  devises  to  corporations,  S'y  54. 
On  taking  property,  S'y  47. 

Limits  of  Corporate  Powers. 

Notice  of,  S'y  65. 
Literal  Compliance  (Incorporation),  S'y  18. 

Main  Object  of  Grant. 

Things  not  necessary  to,  S'y  40. 
Majority  may  not  Oust  Minority,  S  'y  203. 

Mala  in  Se  and  Mala  Prohibita. 

In  ultra  vires  contracts,  S'y  77. 
Management  of  Corporate  Affairs. 
In  stockholders,  S'y  113. 

Manufacture. 

As  distinguished  from  sales  (restraint  and  trusts),  S'y 

104. 
"Within  state  by  foreign  corporation,  S'y  235. 

MANUFACTURING  COMPANIES. 

Right  to  appropriate  waters,  Stat.  462. 


616  ALPHABETICAL    INDEX. 

(References   are  to   Sections.      S'y    equals   "Summary";    Stat,  equals   "Statutes"; 
Pr.    equals    "Procedure."] 

Measure  of  Compensation  (Eminent  Domain),  S'y  291. 
Meetings. 

Of  stockholders,  Stat.  407-411. 
Merger,  S  'y  175. 

Migrate,  Corporation  cannot,  S'y  1. 
Migration. 

Of  corporation,  S'y  219. 
Mill  Dams. 

Authorization  is  regulation  of  property,  S'y  285. 

MINING  COMPANIES. 

Eminent  domain  extended  to,  Stat.  481. 
Penalty  for  failure  to  furnish  statement,  Stat.  423a. 
Procedure  in  condemnation  eases,  Stat.  483. 
Right  of  stockholders  in,  to  inspect  property,  Stat.  422. 
Right  to  appropriate  waters,  Stat.  462. 
Right  of,  to  enter  lands  for  snrveys,  etc.,  Stat.  482. 
Subscriptions  of  stock,  Stat.  434. 
Minutes  of  Meeting. 
Form,  Pr.  798. 

MONOPOLIES,  TRUSTS  AND  RESTRAINTS  OP  TRADE. 

Monopoly,  S'y  91. 
Trust,  S'y  91,  99-102. 
Partial  restraint  of  trade,  S'y  92-97. 
Restraints  under  Sherman  Act,  S  'y  103-106. 
Monopolies  forbidden,  Stat.  751. 
Mortgage. 

Ultra  vires  enforced,  S'y  79. 
Ultra  vires  void,  S'y  83. 

Mortmain  Acts. 

Forfeitures,  S'y  52. 

None  in  Massachusetts,  S'y  53. 

Of  limitations  in  England,  S'y  49. 

Of  none  except  in  Pennsylvania  and  New  York,  S'y  49. 

Mortmain  Policy. 

In  New  York,  S'y  54. 


I 


ALPHABETICAL    INDEX.  617 

[References  are  to  Sections.     S'y    equals  "Summary";    Stat,  equals  "Statutea"; 
Pr.    equals    "Procedure."] 

Mortmain  Statutes  of  Limitations,  S  'y  48. 
Mortmain  Statutes  not  Re-enacted  Here,  S'y  48. 

NAMES  OF  CORPORATIONS. 

Change  of,  Pr.  773. 

Corporate  unauthorized  use,  Stat.  634a. 

Not  to  be  duplicated,  Stat.  437. 

To  be  stricken  from  records — When,  Stat.  720. 

NAVIGABLE  WATERS. 

Deemed  public  highways,  Stat.  533. 
Under  federal  control,  S'y  279. 

Necessary  Powers  of  Banks,  S'y  37. 

Negligence. 

Corporation  liable  for,  S'y  90. 
Of  directors  and  officers,  S'y  167. 
Nonfeasance  and  Misfeasance. 
Of  officers,  S'y  167. 

Nonresident  Owners. 

Bound  by  condemnation  proceedings,  S'y  307. 

Nonuser  and  Misuser  of  Franchises,  S  'y  201. 

Notaries  Public,  Stat.  451a. 

Notice. 

In  condemnation,  S'y  306. 

Of  annual  meeting  of  stockholders — ^Form,  Pr.  817. 

Of  assessment  and  sale  of  stock — Form,  Pr.  821. 

Of  change  of  name — Form,  Pr.  807. 

Of  first  meeting  of  trustees — Form,  Pr.  799. 

Of  legal  limits  of  corporate  capacity,  S'y  82. 

Of  meeting  of  trustees — Form,  Pr.  818. 

Of  removal  of  place  of  business — ^Form,  Pr.  820. 

Nudum  Pactum  not  Protected,  S'y  39. 

Nullity. 

Corporation  as.  S'y  19. 
Of  ultra  vires  acts,  S  'y  66. 


618  ALPHABETICAL    INDEX. 

[References  are  to   Sections.      S'y    equals   "Summary";    Stat,  equals   "Statutes"; 
Pr.   equate    "Procedure."] 

Oath. 

Of  trustees — Form,  Pr.  800. 
Officer. 

Of  corporation — Authority,  S'y  160. 

Officers,  S'y  155. 

Individual  liability,  S'y  165. 

List  of,  Pr.  769. 

Special  employment,  S'y  157. 

Omission  of  Requirements  (Incorporation),  S'y  18. 

Opening  of  Subscription-books,  S  'y  5. 

Organization,  S  'y  4. 

No  sufficient,  S'y  6. 

Orphan  Associations.     See  Benevolent  Societies,  etc. 

Ostensible  Authority. 

Of  officers,  S'y  160. 

Of  trustees,  S'y  156. 

Ownership. 

Of  corporate  property,  S'y  113. 

Papers. 

Filed  colorable  (incorporation),  S'y  19. 
Parol  Contracts. 

Of  corporation,  S'y  42. 

Partial  Restraint  of  Trade,  S  'y  92. 
Participation. 

Of  directors  and  officers  in  torts,  S  'y  166. 
Partners. 

Stockholders  liable  as,  S  'y  21. 
Partnership. 

Difference  from  corporation,  S'y  1. 
Party  Defendant. 

Corporation  must  be,  S'y  132. 
Party  Receiver. 

Necessary,  S'y  192. 


ALPHABETICAL    INDEX.  619 

[References   are  to   Sections.      S'y    equals  "Summary";    Stat,  equals   "Statutes"; 
Pr.   equals    "Procedure."  ] 

PATRONS  OF  HUSBANDRY.     See  Granges. 

Payment. 

Of  subscriptions  in  property,  S  'y  123 ;  Pr.  7G8. 

Period  of  Corporate  Existence,  S  'y  204. 

Person. 

Corporation  is,  S'y  2. 

Petition. 

For  voluntary  dissolution — Form,  Pr.  822. 

Phantom. 

De  facto  corporation  not,  S'y  20. 

Piers. 

On  navigable  Avater,  S'y  278. 

On  river  private  property,  S'y  273. 

Place  of  Business,  S'y  18. 

Change  or  removal,  Pr.  774. 

Place  of  Creation. 

Law,  S'y  212. 

Place  of  Exercise  of  Power,  S  'y  213. 

Pleading. 

Of  ultra  vires,  S'y  66. 

Pledgee. 

Of  stock— Liability,  S'y  127. 

Police  Power. 

Cannot  be  bargained  away,  S'y  39. 
Over  corporations,  S'y  39. 
Positive  Statutory  Requirements,  S  'y  18. 

Postoffice. 

Condemnation  for,  S'y  256. 

Powers. 

Assumed  beyond  statutory  authority,  S'y  46. 
Of  corporation  in  trustees,  Stat.  407. 
Of  state  over  condemnation  proceedings,  S'y  311. 
Presumed  not  to  be  surrendered,  S'y  40. 


620  ALPHABETICAL    INDEX. 

[References   are  to   Sections.      S'y    equals   "Summary";    Stat,  equals   "Statute*"; 
Pr.    equals    "Procedure."] 

Pre-emption  Claim. 

Compensation  for  taking,  S'y  272. 

Preferred  Stock,  Pr.  766. 
Preferred  Stockholders. 

Not  creditors,  S'y  129. 
Rights  of,  S'y  128. 

Preferred  Stock  Rights. 

To  dividends  and  profits,  S'y  129. 

Preliminary  Considerations,  Pr.  762. 
Prescribed  Statutory  Conditions,  S'y  18. 

Presumption. 

That  act  is  within  corporate  powers,  S'y  86. 

Private  Property. 

For  private  use,  S'y  252. 

Privity. 

Arising  from  stock  transfer,  S'y  121. 

Procedure. 

For  condemnation,  S'y  300. 

In  condemnation  in  discretion  of  legislature,  S'y  304. 

Prohibited  Contracts. 

Enforcement  of,  S'y  80. 

Prohibitions. 

Express  on  holding  land,  S'y  49. 
On  corporations  taking  land,  S'y  68,  69. 
To  foreign  corporations,  S'y  220. 
To  take  property,  S'y  47. 
Promoters,  S'y  134. 

Property. 

Gommon-law  right  to  take,  S'y  48. 

Corporate  to  hold  questioned  by  whom,  S'y  50. 

Foreign  to  corporate  objects,  S'y  48. 

Inherent  right  to  hold,  S'y  53. 

Implied  power  to  take,  S'y  47. 

In  excess  of  limitation  state  only  may  question,  S'y  53. 

Interest,  S'y  136. 


ALPHABETICAL    INDEX.  621 

[References   are  to   Sections.      S'y    equals  "Summary";    Stat,  equals   "Statutes"; 
Pr.   equals   "Procedure."] 

Property  (Continued). 

On  termination  of  company,  S'y  196-199. 
Restrictions  on  holding  how  questioned,  S'y  54. 
Rights  under  charter,  S'y  35. 
Statutory  restriction  to  hold,  S'y  49. 
Tenure  derived  from,  S'y  254. 
Within  territorial  jurisdiction,  S'y  3. 

Protection  of  Public,  S  'y  39. 

Proxies,  S'y  135. 

Proxy. 

Form,  Pr.  812. 

Voting  extension  of  law,  S'y  140. 

Public  Policy. 

As  to  restraints  of  trade,  S  'y  92. 

As  to  voting  trusts,  S'y  146,  147. 

Contracts  contrary  to,  S'y  60. 

In  cases  of  partially  authorized  land  holding,  S'y  71. 

In  cases  of  ultra  vires  contracts,  S'y  75. 

Question  of  ultra  vires  contracts,  S'y  64. 

Public  Rights. 

In  city  streets,  S  'y  283. 

Public  Use,  S'y  250. 
Definition,  S'y  262. 
Involving  use  by  public,  S'y  266. 
Promotive  of  public  benefit,  S'y  266. 
Taking  property  for,  S'y  263. 
What  is,  S'y  260,  261. 

PURPOSE   CLAUSES   IN   ARTICLES   OF   INCORPORA- 
TION. 

Advertising,  Pr.  779. 

Automobiles  and  vehicles,  Pr.  780. 

Brewery,  Pr.  781. 

Bricks,  Pr.  782, 

Cattle,  Pr.  783. 

Commission  merchants,  Pr.  784. 


622  ALPHABETICAL    INDEX. 

[References   are  to   Sections.      S'y    equals   "Summary";    Stat,  equals   "Statutes"; 
Pr.   equals    "Procedure."] 

PURPOSE   CLAUSES   IN   ARTICLES   OF   INCORPORA- 
TION (Continued). 
Distillers,  Pr.  785. 
Dock  and  warehouse,  Pr.  786. 
Electrical  contractors,  Pr.  787. 
Express  business,  Pr,  788. 
Fisheries  and  canning,  Pr.  789. 
Leather,  Pr.  792. 
Lumber,  Pr.  791. 
Milling,  Pr.  790. 
Mining,  Pr.  793. 
Paper,  Pr.  794. 
Railroads,  Pr.  795. 
Real  estate  and  brokerage,  Pr.  796. 

Quantum  Meruit. 

In  ultra  vires  transactions,  S'y  60. 
Recovery  on  ultra  vires  contract,  S'y  63. 
Quo  Warranto  Proceedings,  S  'y  21. 

RAILROAD  COMPANIES. 

Foreign  lines  must  file  route  on  entering  state,  Stat.  501. 

May  aid  in  construction  of  other  roads,  Stat.  499. 

May  bridge  navigable  streams,  Stat.  504. 

May  build  branch  lines,  Stat.  498. 

May  build  irrigation  ditches,  Stat.  506. 

May  buy,  lease  or  consolidate  with  other  roads,  Stat. 
499.       • 

May  construct  spur  tracks,  Stat.  502. 

May  guarantee  irrigation  securities,  Stat.  505. 

Must  allow  equal  privileges  to  all  telephone  and  tele- 
graph companies,  Stat.  517. 

Prior  sales,  leases,  etc.,  legalized,  Stat.  500. 

Refusing  privileges  to  telegraph  or  telephone  company 
— Damages,  Stat.  523. 

Rights  of: 

To  build  over  rivers,  etc.,  Stat.  477. 


ALPHABETICAL    INDEX.  623 

[References   are  to   Sections.      S'y    equals   "Summary";    Stat.  eqTiaU   "Statutes"; 
Pr.   equals   "Procedure."] 

RAILROAD  COMPANIES  (Continued). 

To  cross  or  connect  with  other  roads,  Stat.  476. 
To  enter  land  for  surveys,  Stat.  474. 
Through  defiles,  Stat.  473. 
Subject  to  laws  of  state,  Stat.  503. 

Railways. 

Change  of  grade  or  location,  Stat.  477a. 
Right  to  construct  bridges,  Stat.  504a. 
Tracks  in  streets,  S'y  282. 

Ratification. 

Of  irregular  contracts,  S'y  162. 

Reality. 

De  facto  corporation  is,  S'y  20. 

Real  Property. 

Ultra  vires  contracts  as  to,  S'y  68. 

Reasonable  Restraints,  S'y  94. 
Of  trade,  S'y  92. 

RECEIVERS,  S'y  185-192. 

Conflicting  jurisdiction,  S'y  192. 
Officer  of  court,  S'y  185. 
Power  and  duties,  S'y  186. 

Receiving  Benefit. 

Effect  in  ultra  vires  contracts.  S'y  78. 
Recognized  in  Other  States  (Corporations),  S'y  lli 

RECORDING  FEES. 

When  to  be  paid,  Stat.  730. 
Records  and  Papers,  Pr.  771. 

Registry. 

Of  stock,  S'y  121. 

Of  stock  transfer,  S'y  118. 

Regulation  of  Franchises. 

Not  impairment  of  contract,  S'y  39. 

Regulation  of  Status. 
Charter  is,  S'y  135. 


624  ALPHABETICAL    INDEX. 

[ReferenoAfl  are  to  Sections.     S'y    equaJs  "Summary";    Stat,  equals  "Ststmtes"; 
Pr.   equals    "Procedure."] 

Relaxation. 

In  construing  corporate  powers,  S'y  42. 

RELIGIOUS,    EDUCATIONAL,    SOCIAL    AND    CHARL 
TABLE  ASSOCIATIONS. 

Colleges  may  confer  degrees,  Stat.  683. 

Dissolution  of  corporation,  Stat.  684. 

Formation  of — Articles,  Stat.  677. 

Powers  of,  enumerated,  Stat.  678. 

Validating  defective  articles,  Stat.  685. 
Removal  of  Suits. 

By  foreign  corporation,  S'y  221. 
Repeal  of  Charter,  S'y  35. 
Reports. 

Of  corporations,  Pr.  762. 
Repudiation  of  Just  Obligation. 

In  ultra  vires  contracts,  S'y  76. 
Requirements  of  Law,  S  'y  18. 
Requisites. 

Of  stockholders'  suit,  S'y  133. 
Reservation  of  Power,  S  'y  36. 
Reservation  of  Right. 

To  amend,  alter  or  repeal  charter,  S'y  41. 
Residence. 

Of  corporation,  S'y  229. 
Resident  in  Each  State,  S'y  3. 
Respondeat  Superior,  S'y  167. 
Restraints  of  Trade,  S'y  91. 

Examples,  S'y  93. 

In  light  of  reason,  S'y  107. 

Under  Sherman  Act — Examples,  S'y  105,  106. 
Restriction. 

Of  ultra  vires  defense,  S'y  77. 

On  holding  property  by  corporation,  S'y  70. 

On  holding  property  not  to  be  raised  collaterally,  S'y 
554. 


ALPHABETICAL   INDEX.  625 

[Refereiices   are  to   Sections.      S'y    equals   "Summary";    Stat,  equals   "Statutes" ; 
Pr.    equals    "Procedure."] 

Restrictive  Covenants,  S'y  94. 
Examples,  S'y  95,  96. 

Revocability  of  Proxy,  S  'y  141. 

Revocable  Licenses. 

Repealable,  S'y  39. 

Right  to  Take  Property. 

Question  of,  S'y  47. 

Rights  and  Powers  of  Corporation. 

Implied,  S'y  42. 

Rights,  Duties  and  Liabilities  of  Stockholders,  S  'y  110. 
Rights  of  Fishery,  S'y  277. 

Rights  Under  Executed  Contracts. 

Vested,  S'y  40. 

Riparian  Owners. 

Obligation,  S'y  280. 

Rights,  S'y  278. 
Rule  as  to  Eminent  Domain,  S  'y  251. 

Sale. 

Of  all  assets  and  property,  S'y  203. 
Of  stock  at  best  price,  S'y  125. 
Scope  of  Exercise  of  Eminent  Domain,  S  'y  251. 

Seal. 

Corporate  acts  under,  S'y  42. 
Corporate  contracts  under,  S'y  42. 

SECRETARY  OF  STATE. 

Fees  to  be  paid  to. 

SECRET  SOCIETIES. 

Articles— Where  to  be  filed,  Stat.  679. 
Filing  fee— Where  paid,  Stat.  680. 
Powers — Not  subject  to  license  fee,  Stat.  681. 
Waiver  of  original  right  to  name,  Stat.  642. 

Security  of  Property  Owners,  S'y  39. 

40 


626  ALPHABETICAL    INDEX. 

[References  are  to  Sections.     S'y    equals  "Summary";    Stat,  equals  "Statutes" 
Pr.   equals   "Procedure."] 

Service. 

On  agent  of  foreign  corporation,  S'y  231. 
Setoff. 

By  stockholder  of  debt  due  by  company,  S'y  124. 

Several  States. 

Charters  in,  S'y  218. 

Sherman  Act,  S'y  103. 

Simple  Contract  Creditor. 

Not  entitled  to  receivers,  S'y  191. 
Single  Contract  Within  State,  S'y  236. 
Situs  of  Corporate  Stock,  S'y  114. 

SOCIAL  AND  CHARITABLE  ORGANIZATIONS. 

Act  not  retroactive,  Stat.  696. 
Agreement : 

Of  associations,  Stat.  686. 

Amendment  to,  Stat.  6'97. 

To  state,  what,  Stat.  688. 
Beneficiaries,  Stat.  693. 
By-laws  to  contain   what,  Stat.  692. 
Certificate — Contents  and  filing  of,  Stat.  691. 
Death  fund,  Stat.  694. 

Exempt  from  operation  of  insurance  laws,  Stat.  695. 
Form  for  articles,  Stat.  753. 
Objects  of,  Stat.  687. 
Subscribers,  first  meeting  of,  Stat.  689. 
Temporary  secretary — Election  of  officers,  Stat.  690. 

Solvent  Corporation. 

Management,  S'y  191, 

Source  of  Corporate  Existence,  S'y  1. 
Sovereign  Power  to  Take  Property,  S  'y  250. 

Special  Assessment. 

On  property,  S  'y  287. 

Special  Charter. 

For  bank,  S'y  7. 


ALPHABETICAL    INDEX,  627 

[RefOTenoes  are  to  Sections.      S'y    equals  "Summary";    Stat,  equals   "Statutes"; 
Pr.   equals   "Procedure."] 

STATE  AUDITOR. 

Must  approve  by-laws  of  building,  loan  and  savings  as- 
sociations, Stat.  552. 

To  hold  securities  of  building,  loan  and  savings  associa- 
tions, Stat.  555. 

To  surrender  securities  of  building,  loan  and  savings  as- 
sociations, when,  Stat.  556. 

State  Lands. 

Condemnation  of,  Stat.  464a. 

Statement  of  Officers. 

Form,  Pr.  806. 

STATE  TREASURER. 

Penalties  to  be  paid  to,  Stat.  456. 

Status  of  Stockholders,  S'y  111. 
Statutes. 

Substantially  complied  with,  S'y  6. 

Statutes  and  Legislation. 

Re  foreign  corporations,  S'y  216. 

Statutory  Authority  to  Take  Property,  S'y  47. 
Statutory  Liability  of  Stockholders,  S  'y  126. 

Statutory  Notice. 

Omitted,  S'y  5. 

Statutory  Receivers,  S'y  189. 

Statutory  Remedies. 

For  consequential  damages,  S'y  281. 

Statutory  Requirements. 

Compliance  with,  S'y  19. 

Statutory  Restrictions. 

On  holding  land,  S'y  49. 

Statutory  Right. 

Acquiring,  S'y  18. 
Steps  Necessary  to  Organization,  S'y  6. 
Stipulation  not  to  Remove  Suits,  S  y  221. 


628  ALPHABETICAL    INDEX. 

[Referenoet  are  to  Sections.      S'y    equals  "Summary";    Stat,  equals   "Statute!** ; 
Pr.   equals   "Procedure."] 

Stock. 

Issued  for  property,  Pr.  768.  Jhi^C  ^ir- 

Of  other  companies,  holding,  S'y  180-182.  V  i 

Subscription,  S'y  5.  ?f^'t/^<'/  .  6'//\  ^/ 

Subscription  assessments,  Pr.  772. 
Subscription  paid  in  property,  S'y  123. 

Stock  Certificate. 

Evidence  of  ownership,  S'y  118. 

Form,  Pr.  802. 

Limits  rights  of  preferred  stock,  S'y  128. 

Stock  Dividends,  S  'y  130. 

STOCKHOLDERS. 

Contractual  status,  S'y  111. 
Control  of  corporate  acts,  S'y  114. 
Conversion  of  stock,  S'y  117. 
Director's  accountability,  S'y  131. 
Dividends,  S'y  129. 
Forged  transfer,  S  'y  120. 

In  banks : 

Failing  to  pay,  Stat.  617. 

Interest  in  property  of  company,  S'y  113. 

Liability  for  unpaid  installment,  S'y  122. 
Liability  of,  in  banks,  Stat.  622. 
Liability  to  creditor,  S'y  123. 
May  pledge  stock — Effect  of,  Stat.  416. 
Meetings  of,  Stat.  411. 
Meeting  of,  for  dissolution,  Stat.  428. 
Mutual  relations,  S'y  110. 
Pledgee  voting  rights,  S'y  115. 
Preferred  stockholders'  rights,  S'y  128. 
Promoters,  S'y  134. 

Protection  of,  from  fraudulent  reports,  Stat.  438. 
Record  of,  Stat.  420. 
Right  of,  in    mining    companies,  to    inspect    property, 

Stat.  422. 
Sale  of  stock  below  par,  S'y  125. 


ALPHABETICAL    INDEX.  629 

[Referencsi   are  to   Sections.     S'y    equals  "Summary";    Stat,  eqaali  "Statute*"; 
Pr.    equals    "Procedure."] 

STOCKHOLDEES  (Continued). 
Statutory  assessments,  S'y  124. 
Statutory  liability,  S'y  126. 
Setoff,  S'y  124. 
Stock  dividends,  S'y  130. 
Stock  issued  for  property,  S'y  123;  Pr.  768. 
Stock  to  be  sold— When,  Stat.  617. 
Subscribers  to  stock,  S'y  112. 
Subscription  a  contract,  S'y  116. 
Suits  by  stockholders,  S'y  131-133. 
Transferee  in  blank,  S'y  119. 
Transferee,  liability,  S'y  127. 
Transfer  of  stock  registered,  S'y  118. 
Transfer  on  books  of  company,  S'y  121. 
Trustee  voting  rights,  S'y  115. 
Become  such  how,  S'y  121. 
Meetings,  Stat.  407-411 ;  Pr.  775. 
Not  owners  of  corporate  property,  S'y  113. 
On  termination  cotenants,  S'y  196. 
Suing  must  join  corporation,  S'y  132. 
Suit,  other  remedies  exhausted,  S'y  133. 

Strict  Construction  of  Charter,  S'y  35. 

Strict  Rule  in  Case  of  Ultra  Vires  Contracts,  S'y  82. 

Submission. 

To  state  jurisdiction,  S'y  223. 

Subscribers  not  Sigiiing  Articles,  S  'y  7. 

Subscription. 

To  stock— Form,  Pr.  803. 
To  stock,  validity  of,  S'y  116. 

Subscriptions,  Pr.  765. 

Of  stockholders,  S'y  11^. 

To  stock,  alterations,  S'y  116. 

To  stock  ultra  vires  and  void,  S'y  84. 

Unpaid  installments,  S'y  122. 
Substantial  Compliance  (Incorporation),  S'y  18. 


630  ALPHABETICAL    INDEX. 

[Referencea  are  to  Sections.     S'y    equals  "Summary";    Stat,  equals   "Statutes"; 
Pr.   equals    "Procedure."] 

Sue. 

Eight  to  in  other  states,  S'y  215. 
Suits. 

Against  foreign  corporation,  S'y  229,  233,  234. 

Of  foreign  corporations,  S'y  222. 
Supplemental  Articles. 

Form,  Pr.  808. 

Taking  and  Holding  Land. 

Not  expressly  prohibited,  S'y  56. 
Taking  of  Private  Property,  S  'y  270. 
Taking  Property. 

By  devise,  S  'y  50. 
What  is,  S'y  271. 

Taxation. 

Distinguished  from  eminent  domain,  S'y  270-284. 
Not  taking  of  property  in  condemnation,  S'y  286. 
Of  franchises,  S'y  32. 

Tax,  Federal  Corporation,  Stat.  752-759. 

TELEGRAPH  COMPANIES. 

May  recover  damages  from  railroad,  when,  Stat.  523. 
Authority  to  use  highways  for  poles,  etc.,  Stat.  519. 
Eminent  domain  extended  to,  Stat.  478. 
Entitled  to  equal  privileges  from  railroads,  Stat.  517. 
Failure  to  transmit  message — Penalty,  Stat.  522. 
Malicious  injury  to  any  property  of — May  recover,  Stat. 

521. 
Injury  to  line — May  recover  for,  Stat.  520. 
May  build  along  railroad  lines,  Stat.  480. 
May  use  right  of  way  of  post  road,  Stat.  516, 
Must  receive  and  transmit  messages,  Stat.  518. 
Right  of,  to  enter  upon  land,  Stat.  479. 
Right  to  enter  lands  for  survey,  etc.,  Stat.  515. 
Subaqueous  cables  to  be  marked,  Stat.  524. 


ALPHABETICAL    INDEX.  G31 

[References  are  %o  Sections.     S'y    equals  "Summary";    Stat,  equals  "Statutes"; 
Pr.   equals    "Procedure."] 

TELEPHONE  COMPANIES. 

Authority  to  use  highways  for  poles,  etc.,  Stat.  519. 

Eminent  domain  extended  to,  Stat.  478. 

Entitled  to  equal  privileges  from  railroads,  Stat.  517. 

Failur®  to  transmit  message — Penalty,  Stat.  522. 

Injury  to  line — May  recover  for,  Stat.  520. 

Malicious  injury  to  any  property  of — May  recover,  Stat. 

521. 
May  build  along  railroad  lines,  Stat.  480. 
May  recover  damages  from  railroad,  when,  Stat.  523. 
May  use  right  of  way  of  post  road,  Stat.  516. 
Must  receive  and  transmit  messages,  Stat.  518. 
Right  to  enter  lands  for  survey,  etc.,  Stat.  515. 
Subaqueous  cables  to  be  marked,  Stat.  524. 
Tenures  of  Property. 

Government  source,  S'y  255. 

Termination. 

By  expiration  of  charter,  S'y  205. 
Conversion  of  assets,  S'y  203. 
Judgment  after,  S'y  201. 
Of  corporation,  S'y  195. 

TERMINATION  OF  CORPORATE  EXISTENCE,  S'y  195- 

203. 

Threatened  Wrong. 

Basis  of  stockholders'  suit,  S'y  133. 

Title. 

Of  receivers,  S'y  189. 

Passes  when  compensation  paid,  S'y  295. 

To  lands  condemned,  S'y  304. 

TOLL-LOGGING  ROADS  AND  WAYS. 

Articles  of  incorporation,  Stat.  542. 
Deemed  common  carrier,  Stat.  545. 
Eminent  domain  extended  to,  Stat.  545. 
Must  transport  logs,  etc.,  Stat.  544. 
Power  of  corporation,  Stat.  543. 


632  ALPHABETICAL    INDEX. 

[References  are  to   Sections.      S'y    equals   "Summary";    Stat,  equals   "Statutea" ; 
Pr.   equals    "Procedure."] 

Tolls. 

Power  to  take  by  corporation,  S'y  45. 

Power  to  take  must  be  expressed,  S'y  45. 
Tort. 

Committed  in  foreign  country,  S'y  232. 

Corporate,  S'y  90. 

Liability  of  directors  and  officers,  S'y  165. 

Of  corporation,  liability  of  officers,  S'y  168. 
Transaction  of  Business  for  Years,  S  'y  20. 

Transfer. 

Of  stock  in  blank,  S'y  117. 

Transferee  of  Stock,  S'y  127. 

Liability  on  subscription,  S'y  121. 
Subject  to  liens,  S'y  119. 

Transfers  of  Stock,  S'y  112. 

TRUST  COMPANIES.     See,  also.  Banks. 

Certificate  of  organization — What  to  show,  Stat.  589. 

Deposits  for  minors,  Stat.  597. 

Directors,  election  of,  etc.,  Stat.  592. 

Duties  of,  as  trustees,  executors,  etc.,  Stat.  601. 

False  entries,  etc.,  a  misdemeanor,  Stat.  595. 

Fees  to  be  paid,  Stat.  604. 

Filing  of  certificate,  etc.,  Stat.  590. 

Formation  of  company,  Stat.  588. 

Increase  of  capital  stock,  Stat.  603. 

Insolvency  of,  Stat.  599. 

Liability  of  stockholders,  Stat.  602. 

Not  to  loan  on  own  stock,  Stat.  596. 

Powers  outlined,  Stat.  591. 

Prohibited  from  making  loans  to  officers,  Stat.  593. 

Refusal  to  submit  to  examination,  Stat.  600. 

Report  to  state  bank  examiner,  Stat.  594. 

State  bank  examiner  has  supervision  over,  Stat.  598. 

"When  authorized  to  do  business,  Stat.  591. 


ALPHABETICAL    INDEX.  633 

[References  »re  to   Sections.      S'y    equals   "Summary";    St&t.  equals  "Stat«.tM"; 
Pr.   equals    "Procedure."] 

Trustees. 

Powers  of,  Stat.  407. 
Transfer  of  stock  to,  S'y  144. 

Trustees  and  Directors. 

And  officers   agents,  S'y  155. 

TRUSTEES  OF  CORPORATIONS. 

Dealing  with  themselves  presumed  fraudulent,  S'y  158. 
First  meeting,  Pr.  764. 

How  called,  Stat.  412. 
First  trustees  to  serve  how  long,  Stat.  402. 
Liabilities  of,  Stat.  417. 
Lapse  of  election  of,  Stat.  409. 
Meetings  of,  Stat.  411;  Pr.  770. 
Majority  must  sign — Increasing  capital,  Stat.  426. 
Powers  of,  upon  dissolution,  Stat.  427. 
Quorum  of,  Stat.  410. 

Trustees  or  Directors. 

Powers  limited,  S'y  156. 

Trustees'  Powers. 

Limit  of,  S'y  159. 

Trust  Fund. 

For  creditors,  S'y  124. 

Trusts,  S'y  91. 

And  monopolies,  S'y  100. 

Ultra  Vires. 

As  a  defense,  S'y  75,  80. 

Ultra  Vires  Acts. 

And  abuse  of  powers,  S'y  82. 
Of  directors,  S'y  156. 

Ultra  Vires  Contracts. 

And  transactions  where  executed,  S'y  71. 
Attitude  of  courts,  S'y  67. 
Authorized  for  some  purposes,  S'y  85. 
Benefits  received,  S'y  85. 


634  ALPHABETICAL    INDEX. 

[References  are  to   Sections.     S'y    equals  "Summary";   Stat,  equals  "StatnteB" ; 
Pr.   equals    "Procedure."] 

Ultra  Vires  Contracts  (Continued). 
Enforceable,  S'y  80. 
Enforced,  S'y  76. 
Not  enforceable,  S'y  84. 

Partly  executed  and  benefits  received,  S'y  85. 
Where  departure  from  powers  existing,  S'y  85. 
"Where  no  power  to  make,  S'y  85. 
Void,  S'y  60. 
Void  as  to  public,  S'y  77. 

Ultra  Vires  the  Charter,  S'y  162. 

ULTRA  VIRES  TRANSACTIONS. 

Acts  authorized  by  charter,  S'y  60. 

Nullity  of  ultra  vires  acts,  S'y  66. 

Public  policy,  S  'y  64. 

Quantum  meruit,  S'y  68. 

Ultra  vires  as  defense,  S'y  75-86. 

Ultra  vires  void,  S'y  61. 

Unauthorized  contracts  unenforceable,  S'y  62. 

Unauthorized  acts  cannot  be  ratified,  S'y  60. 

Unauthorized  taking  of  realty,  S'y  67-71. 
Not  to  be  ratified,  S'y  162. 

Unauthorized  Contracts  or  Transactions,  S'y  60. 

Unauthorized  Transfer  of  Stock,  S'y  120. 

Unenforceable  Restraint  of  Trade,  S  'y  93. 

Unexecuted  Contracts  for  Unauthorized  Conveyances,  S'y. 
70. 

United  States  Government  Right  of  Eminent  Domain,  S'y 
256. 

User  by  Corporation,  S  'y  21. 

Usurpation  of  Pow^ers. 

By  corporations,  S'y  60. 

Vacation  of  Award. 

In  condemnation,  S'y  311. 


ALPHABETICAL    INDEX.  6S5 

[References  are  to   Sections.      S'y    equals   "Summary";    Stat,  equals  "Stiktutos"; 
Pr.   equals   "Procedure."] 

Vested  Rights,  S'y  40. 

As  to  charters,  S'y  35. 

Vitality  of  Ultra  Vires  Contracts. 

None,  S'y  62. 
Voidable,  not  Void,  Contracts  of  Trustees  With  Corporation, 

S'y  164. 
Voidability  of  Ultra  Vires  Contract,  S  'y  60. 
Void  and  Voidable  Conveyances  to  Corporations,  S'y  55. 
Void  Per  Se  Contracts,  S'y  60. 

Voting. 

A  duty,  S'y  136. 

A  franchise,  S'y  136. 

In  public  corporation,  S'y  136. 

Stock  by  executor  or  pledgee,  S'y  115. 

Stock  by  trustee,  S'y  115. 

Trusts,  S'y  135,  143. 

Trusts  active  trusts,  S'y  148. 

Trust  agreements,  S'y  144,  145. 

Trusts  coupled  with  interest  and  active,  S'y  150. 

Trusts  not  contrary  to  public  policy,  S'y  149. 

VOTING  BY  PROXY  AND  VOTING  TRUSTS. 

Charter  regulation  of  status,  S'y  135. 
Property  right,  S'y  136. 
Proxies,  S'y  137-140. 
Revocability  of  proxy,  S'y  141,  142. 
Voting  trusts,  S'y  143-150. 

Waiver  of  Notice  of  Meeting. 
Form,  Pr.  819. 

WAREHOUSEMAN. 

Bill  of  lading  must  be  canceled,  when,  Stat,  448. 
Fraudulently  mixing  goods,  Stat.  446. 

issuing : 

Duplicate  receipt,  Stat.  447. 


636  ALPHABETICAL    INDEX. 

[Rpeferenees  are  to   Sections.      S'y    equals   "Summary" ;    Stat,  equals   "Statutei" 
Pr.   equals   "Procedure."] 

WAREHOUSEMAN  (Continued). 

Fictitious  bill  of  lading,  Stat.  445. 
Refusing  to  issue  receipt,  Stat.  444. 

WATER  COMPANIES. 

May  acquire  lands  and  water,  Stat.  432. 

Must  obtain  right  or  privilege  from  city,  Stat.  433. 

Provisions  of  law  extended  to,  Stat.  431. 

Watering  of  Stock,  S  'y  125. 

WATER  POWER  COMPANIES. 

Eminent  domain  extended  to,  Stat.  490. 
Procedure  in  condemnation  cases,  Stat.  492. 
Right  of,  to  enter  lands  for  surveys,  etc.,  Stat.  491. 

Water  System. 

Condemnation  of,  S'y  276. 

Ways  of  Necessity,  Stat.  473a. 
Condemnation,  Stat.  546a. 
Duty  as  common  carriers,  Stat.  546b. 

Where  Dealing  Takes  Place. 

Corporation  is  recognized,  S'y  1. 

Wrongs. 

Corporation  liable  for,  S'y  90. 


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